Dollar bulls suffer

19th February 2018 Market Update

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?? GBP - The pound performed relatively well last week after CPI overshot market expectations at 3%. Despite the strong week for the pound, Friday led to a slight retracement as retail sales came in below expectations at 0.1%.

This evening Mark Carney is speaking; however, this is not expected to move the markets unless he makes any statements which are particularly hawkish/dovish. On Wednesday average earnings and the unemployment rate are out. This will probably be the key piece of data for the UK this week. If average earnings are above expectations, this could further signal that an interest rate rise is around the corner. Average earnings are then followed by the inflation report hearings.

On Thursday the second estimate of the UK's GDP is announced, however there is only a slim chance of it not meeting expectations as it is a second estimate.

?? EUR - Last week was light data wise from Europe, with European GDP coming out in line with expectations at 0.6%. Despite the lack of data, the euro performed well against the dollar in particular last week as dollar weakness was the theme of the week.

On Wednesday, manufacturing and services figures are released from Europe. Both readings are forecast to be slightly worse than last month’s readings for Europe as a whole, however they will remain particularly strong. On Thursday the ECB's monetary policy accounts are released to the market. A more hawkish tone could lead to further strength as it is seen as the best performing major economy at the moment.

?? USD - Across last week the dollar was put under pressure as its status as the global reserve currency is under threat whilst the Trump administration rolls on. Despite CPI coming in above market predictions on Wednesday, it appeared to be more concerned with the worse than expected retail sales data which showed a 0.3% contraction. Despite a lack of data on Friday, the dollar strengthened across the board prior to today's bank holiday.

Today no US dollar payments are being made due to it being President’s Day in the US. This week is quiet for the US with Fed meeting minutes being released Wednesday being the only thing of note. FOMC members Dudley, Mester and Williams are speaking Friday afternoon.


Key Announcements

?? USD
Bank holiday – President’s Day

?? GBP
18:45pm: BOE Gov Carney Speaks


Summary: Last week the dollar was placed under pressure as the market has increasing concerns about the dollar’s status as a reserve currency. Despite a lack of data, the dollar strengthened Friday prior to today’s US bank holiday – which also means there are no US dollar payments being sent today.
This week is relatively quiet data wise with average earnings being released from the UK on Wednesday along with services and manufacturing PMIs being released from across Europe. On Thursday the ECB's monetary policy accounts are released from Europe, and this will potentially provide clearer forward guidance regarding Europe’s possible tapering.


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