12th January 2017 Market Update
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🇬🇧 GBP – Sterling rebounds off the October 2016 low following Trumps press conference.
🇪🇺 EUR – ECB minutes will be in focus this afternoon.
🇺🇸 USD – Saw huge losses across the board, following Trump’s volatile news conference.
FairFX View: We could see movement in the morning as investors make sense of last night’s political news. The only real key data out today is ECB monetary policy minutes this afternoon. Following Carney’s speech yesterday suggesting that Europe is worse off than the UK following Brexit, it will be interesting to see if this is addressed. If they concur then we could see some relief for the pound.
Fears of a hard Brexit indicated by Theresa May earlier in the week, has put the pound on a downward trend. This was yesterday compounded after lacklustre trade data in the morning. The data showed Britain’s trade performance deteriorated at the end of last year, as goods imports outweighed exports, showing the pound’s drop since Brexit is yet to reset the balance. At the lowest point in the day, GBP/USD dropped to the level last seen in the flash crash of October, but was soon lifted with Trump’s news conference.
GBP/EUR remained more volatile during the day’s trading, with traders struggling to determine who comes off worse from Brexit. Overall, economists are still left with the impression that the real UK economy has yet to be hit by Brexit and it continues to be politics rather than the economics hitting the pound. A speech from Mark Carney stated that the financial measures by the BoE before and after Brexit (expansion of QE and dropping the interest rate) has softened the blow for the UK, and the risk was greater for continental Europe. This speech did not weigh too heavily on the markets.
Finally in the afternoon, a turnaround for the pound, as a fiery debate from Donald trump seemed to scare investors from the USD. The much anticipated question and answer session had been originally called to demonstrate how Trump would avoid conflicts of interest between his business empire and his public duties. The event however, was heavily overshadowed by overnight news that the FBI had been handed unverified but potentially damaging intelligence.
🇪🇺 EUR – Industrial production in the Eurozone is predicted to improve on previous readings this morning, however the only real key data out today is ECB monetary policy minutes this afternoon.
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