20th January 2017 Market Update
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🇬🇧 GBP – Retail Sales data will likely dictate direction of Sterling today.
🇪🇺 EUR – Draghi very dovish in delivering interest rate decision yesterday.
🇺🇸 USD – Eyes will be on Trump’s inauguration this afternoon but is unlikely to bring significant movement.
FairFX View: After a week of key events, Sterling will hope to maintain its gains and with minimal data releases next week, we could see a level of stagnation over the coming days. The upcoming Supreme Court decision on Parliament’s role in the signing of Article 50 could affect rates, however. Looking further afield, Trump’s desire to weaken the dollar contrasts with Yellen’s suggestions of an interest rate increase. It remains to be seen who the winner will be.
A quiet morning meant that most markets took a breath in the early part of yesterday, with minimal rate movement seen. Cable regained the lost ground from Wednesday before Theresa May spoke at the Davos World Economic Forum, reiterating her desire for Britain to take the lead as an advocate for free markets and free trade, anywhere in the world.
At 12:45, the ECB held interest rates at the expected 0% and maintained the current level of quantitative easing. However, Draghi struck a dovish tone and refused to acknowledge the rising prices that have the potential to cause problems for the currency bloc this year. Sterling gained against the euro as a result.
Overnight, Yellen warned against delaying an interest rate rise for too long, which could cause market disruption. She rejected the notion that the Fed is behind the rate increase curve however. Further comments of this nature will most likely boost the US dollar.
🇬🇧 GBP – Retail Sales figures from the UK for December at 09:30 are expected to show a mixed picture. The direction of this result will be a strong factor in the rate movements across the day and will be worth watching the release closely.
🇨🇦 CAD – Inflation and Retail Sales figures expected to disappoint at 13:30. The Canadian dollar has struggled this week and these releases could allow further Sterling gains.
🇺🇸 USD – Trump’s inauguration from 16:30 will be unlikely to create much movement due to its predictability. However, FOMC Member Harker’s speech beforehand, at 14:00 might bring volatility, if interest rate increases are mentioned.
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