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Pound falls steeply after MPC Members remain coy over interest rate rise

12th July 2017 Market Update

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🇬🇧 GBP – It was a quiet day data wise for the pound yesterday. Up until the early afternoon it traded relatively flat against the greenback and the single currency. From the start of the UK trading session to the finish the pound ended up dropping over a cent against the euro and continued to fall even further until a plateau at around 7:30pm UK time.

The currency markets yesterday moved mainly on not what was said but what wasn’t. Speeches by Bank of England chief economist Andy Haldane and his colleague deputy governor Ben Broadbent were earmarked by traders as possible indicators on the proximity of interest rate rises, but they failed to mention the elephant in the room leading to traders losing faith in the pound. Furthermore they also mentioned that leaving the EU will damage trade, weakening Sterling.

This morning we have UK average earning figures being released which are expected to come in slightly lower than last month meaning we could see more pressure on the pound.

🇪🇺 EUR – It was much the same from the Eurozone yesterday as it gained even more ground against the pound pushing it to 9 month lows even though there was no significant data released. Today we have European Industrial production figures released which is set to come in 0.5% better than the previous release.

🇺🇸 USD – There was no significant data released from the US yesterday and all of the movement we saw against the pound was due to Sterling weakness for reasons listed above.

At 3pm today US Fed Chair Yellen is due to testify on the Semiannual Monetary Policy Report before the House Financial Services Committee, in Washington DC.

Later in the afternoon we have the weekly Crude Oil inventories which is expected to come in over 3 million barrels lower than last week, this tends to have little to no effect on the currency markets.

 

Key Announcements

🇬🇧 GBP
09:30am – Average Earnings

🇺🇸 USD
15:00pm – Fed Chair Yellen Testifies
15:30pm – Crude Oil Inventories

 

Our View: With the pound continuing to fall against the other majors, it is difficult to fathom a reason for its recovery for this week at least. It could come under even more pressure later in the week from the greenback if we see positive Retail sales, PPI and CPI figures.

 

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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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