blackfriars bridge evening

Pound struggles to push on

12th October 2017 Market Update

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🇬🇧 GBP – It was a quiet day for the pound with no economic data releases and it showed with the currency trading relatively flat against both the euro and the dollar. However, the pound is still nearly two cents higher against the dollar than Friday’s one month low. A well renowned currency blog highlighted the reason for the pound dropping off recently being as; ‘the Bank of England’s planned rate hike is not so much the reflection of stronger growth, but reduced investor and production potential that is forcing the BoE into action.’

The ongoing Brexit negotiations seem to be no closer to reaching any sort of mutual agreements and yesterday Phillip Hammond said; ‘the UK will wait until the last possible moment before releasing large amounts of money to fund contingency plans for Britain leaving the EU without a Brexit deal.’ It seems to be becoming clear now that we are preparing for a no-deal scenario and this ongoing uncertainty may well continue to hinder the pound’s performance.

No major data being released from the UK for the rest of the week.

🇪🇺 EUR – The euro has picked up by around a cent and a half against the dollar since the recent two-month low.

President Draghi is due to participate in a panel discussion alongside FOMC today. The discussion is set to be based around monetary policy at the Peterson Institute for International Economics in Washington DC this afternoon and is bound to be quizzed about future interest rate movement and QE movement.

🇺🇸 USD – The only major news came at 7pm yesterday evening when the FOMC minutes were released from the US. The Fed left interest rates unchanged following its meeting on September 20 and signalled that it still intended to raise rates in December, despite the sluggish inflation outlook. After yesterday’s minutes a December rate hike looks all but certain despite low inflation. The FOMC committee view the US economy to be growing and said that a rate hike is nearly inevitable. Despite the optimism from the Fed, the US dollar weakened off.

Today we have PPI and unemployment claims which are both expected to come in slightly better than they did previously. We also have FOMC member Brainard and Powell speaking this afternoon.

 

Key Announcements

🇺🇸 USD
13:30pm – PPI, Unemployment Claims
15:30pm – Brainard and Powell speak

🇪🇺 EUR
15:30pm – Mario Draghi Speech

 

Our View: The pound will surely finish the week on the back foot against both the euro and dollar due to the lack of data being released from the UK. If key economic figures from the US turn out to be positive, coupled with the fact that Draghi is speaking alongside two key FOMC members about monetary policy today, it is hard to fathom a reason why the pound will firm up especially if we see more indecision from Theresa May and her government.

 

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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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