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EUR marches to fresh highs

29th August 2017 Market Update

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🇬🇧 GBP – Sterling had a tough time of it last week, falling to 13-day lows versus the dollar and really plumbing the depths against the euro.

Tuesday saw the only crumb of comfort with the release of a public sector net borrowing figure above expectations. This lead to marginal gains that were very short lived.

Thursday gave us GDP data in line with expectations, but it was Friday’s Jackson Hole speeches from central bankers that were the big news of the week. The important points from the speeches are below, but they essentially caused the pound to claw back recent losses versus the US dollar, but plunge to fresh lows against the euro.

This week sees very little data from the UK, with the only potential key indicators being Wednesday’s Inflation Report and Manufacturing PMI due on Friday. The reality is, however, that Sterling is very much on the back foot and remains increasingly vulnerable to further losses whilst Brexit uncertainty abounds.

🇪🇺 EUR – The euro has enjoyed major buoyancy for some time and last week edged ever higher versus the pound.

Once again, the big news was Jackson Hole on Friday. In his speech, the ECB’s Mario Draghi crucially showed no visible concerns over euro appreciation and gave no hints at tapering off QE. It was very much a case of what he didn’t say rather than what he did and investors have taken this as a massive positive for the single currency. The euro has subsequently leaped to its best level since 2009 against the pound and 31-month highs versus the US dollar. However, it should be noted that Draghi will, at some point, have to address the QE issue.

This week sees some major data for the zone, with Thursday being a big day. This sees German Unemployment figures released, together with EU CPI Core Inflation data.

🇺🇸 USD – It was a very quiet week for the dollar data-wise, though the currency did enjoy gains against the pound to reach near 2-week highs.

All eyes were firmly focused on Friday’s Jackson Hole symposium and Janet Yellen’s speech. The Fed’s Yellen was bearish in tone and suggested direct opposition to the Trump administration’s economic policy. This suggests that her re-appointment may well be less likely and has caused the dollar to lose recent gains versus Sterling. Against the euro, a perfect storm has caused the greenback to slip markedly further to 31-month lows.

Coming up is a big week data-wise for the dollar, with lots of releases throughout. The key data to watch for will be Wednesday’s Annualised GDP figure, together with Non-Farm Payrolls and Unemployment Rate data due on Friday. Also on Friday will be the release of Manufacturing PMI data and later in the evening sees the published results of bank stress testing.

 

 

Key Announcements

There is no key data due today.

 

Our View: Whilst the pound has enjoyed gains versus the US dollar after Friday, it is small comfort for a currency that is merely treading water. The ongoing Brexit negotiations will cast a huge shadow over Sterling for some time and it is looking increasingly unlikely that we will see any reversal of fortune anytime soon.
 
The euro continues to go from strength to strength and is positioned at long-term highs versus both its major counterparts.
 
With quite a lot of key data out this week, it will be interesting to see movement between the majors. The truth is that Sterling may end up being the loser, once again.

 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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