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Sterling sell off

3rd May 2018 Market Update

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🇬🇧 GBP – The pound has dropped off in value against most major currencies over the past week or so, with Sterling dropping to the lowest point we have seen against the dollar in the calendar year.

The first reason for the drop is the recent slump in economic data. As we’ve mentioned in previous reports, analysts had expected a drop off in productivity for the first quarter of 2018 due to the “poor weather” that we had in the first few months of the year, but they didn’t expect to see the numbers this low.

Inflation unexpectedly dropped down to 2.5%, its lowest level in a year.

🇪🇺 EUR – From the Eurozone on Wednesday the single currency took its direction from comments set by the FOMC late last night. The euro at present looks to have broken through a key support level, there could be further downside if tomorrow’s US jobs report comes in against the euro. That being said at present there isn’t really much out from Europe as the UK and US are taking a lead on the political and economic front. From the Eurozone today, we have data in the form of the inflation numbers, if received positively we could see the euro trade higher against the greenback.

🇺🇸 USD – The dollar traded below a four-month high against a basket of currencies on Thursday, with the focus shifting to economic data after the Federal Reserve did little to alter market expectations for further interest rate rises this year. From the US today we have data in the way of initial jobless claims.

 

Key Announcements

🇬🇧 GBP
08:30am: PMI Services expected at 53.5, previously 51.7

🇪🇺 EUR
09:00am: Inflation YoY expected at 0.9%, previously 1.0%

🇺🇸 USD
12:30pm: Initial jobless expected at 225,000, previously 209,000

 

Summary: Sterling continues sell off amid BoE rate concerns, dropping to the lowest point we have seen against the dollar in the calendar year.
 
FOMC is leaving interest rates on hold. The single currency took its direction off the back of these comments.

 

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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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