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Markets braced for Draghi

10th May 2017 Market Update

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🇬🇧 GBP – Sterling spent the morning trading very flat across the board. With a lack of data and with all eyes on forthcoming EU negotiations, there was nothing that caused the pound to move significantly. However, in the afternoon Sterling made some gains against the euro, though remained flat versus the dollar.

There is a distinct lack of data today, so Sterling will only move based on external events. Draghi’s speech at lunchtime may see some activity versus the euro, but it very much depends on what he says. The chances are that we are in for another very flat day.

🇪🇺 EUR – The euro is certainly a lot more stable following the outcome of the French elections than the lead up. Markets expected a Macron victory and that’s what they got. Therefore, we saw minimal reaction, although the currency has lost some ground to the pound yesterday afternoon.

ECB President Draghi’s speech could hold significance today, depending upon how bullish or dovish he decides to be. The reality is that he is unlikely to rock the boat and will further commit to ongoing policy with little indication of deviation. Markets will likely react with a distinct sense of ennui.

🇺🇸 USD – Against Sterling, the dollar continues to hover below the 1.30 level. This appears to be a stumbling block for the pound to jump over, but so far there are no signs that the barrier will be breached.

There is no doubt that the dollar is looking more vulnerable than in recent times but equally, there are no discernible indications that it will weaken further. With a lack of date today, it is unlikely that there will be any major movement.

 

Key Announcements

🇪🇺 EUR
13.00pm – ECB President Draghi speaks.

🇳🇿 NZD
10.00pm – RBNZ Interest Rate Decision: Expected to remain at 1.75%.

 

Our View: There is very little going on following the French election. The reality is that a lack of significant data and no seismic political events on the horizon have rendered the markets pretty range bound.
 
There is definitely a sense that investors are watching and waiting. We have the general election in the UK in June, coupled with ongoing negotiations with the EU. The jury appears to still be undecided with regards to President Trump. The ECB does not appear to want to alter its monetary policy anytime soon.
 
It’s fair to say that anyone waiting for some sharp spikes in the market, may be waiting for some while.

 

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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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