27th April 2017 Market Update
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?? GBP – Sterling enjoyed a short rally yesterday afternoon, which has carried through to this morning. With no data to back this shift, one possible reason for it could be the results of a poll (Ispos) showing that Theresa May is more popular with voters than any other leader since the 1970’s and another poll (YouGov) revealing that Jeremy Corbyn is more unpopular than ever.
Sterling to US dollar is at it’s best level now since September 2016 and against the euro, Sterling has regained its losses from the start of the week.
No data out today from the UK.
?? EUR – The euro weakened throughout the course of yesterday, as markets seem to be booking profits, following the first round of presidential votes in France.
In focus today will be the European Central Bank’s monetary policy decision, along with the accompanying speech by Mario Draghi. The Bank is expected to maintain its very loose stance, concluding that inflation and wage pressure remain limited.
However, with the pro EU, Emmanuel Macron expected to become French president, Draghi may face some pressure from hawkish colleagues. So, perhaps, we might get some indication that the ECB could tighten policy in the coming months, potentially as soon as June.
?? USD – Yesterday afternoon the US dollar weakened against both the euro and sterling. This was in response to Trump stating his commitment to a “renegotiated” Nafta. This was another u-turn for Trump, as in last year’s presidential campaign he had railed against Nafta. This once again showed that Trump is struggling to fulfil on the proposals he campaigned for last year and this has contributed to the dollar weakening.
This afternoon, core durable goods orders and the weekly unemployment claims are being released from the US. Depending on the figures, this could halt the dollar’s recent decline, or contribute to it weakening further.
10.10am – RBA Gov Lowe Speaks.
12.45pm – Minimum Bid Rate.
1.30pm – ECB Press Conference.
Core durable goods orders; unemployment claims.
Our View: Trump’s commitment to Nafta shows he is struggling to fulfil his campaign promises. This has led to the dollar weakening further and it has reached its lowest levels since October against sterling. Along with Macron’s expected victory next Sunday, the euro remains strong. As a result, we could see the dollar weaken further, with Sterling remaining in limbo until the general election has passed.
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