us federal reserve

End of Yellen’s era

1st February 2018 Market Update

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?? GBP – Sterling maintained its strong position against the euro and dollar yesterday despite a lack of data from the UK. Despite the lack of a clear signal from the government, the markets seem to feel a softer Brexit is more likely.

Manufacturing PMI is out from the UK today and is expected to be another strong reading at 56.5. If expectations are met, Sterling will probably maintain its momentum. Before manufacturing data was released this morning, Sterling picked up further against the euro and dollar which shows the momentum the pound currently has.

?? EUR – CPI and Core CPI came out from Europe in line with expectations at 1.3% and 1% respectively. The slight contraction in CPI signals that the ECB may delay an interest rate rise. The euro remains the investor’s darling with the euro index at its best levels since 2014.

Today manufacturing figures are released from across Europe. There is expected to be a strong figure of 59.6. However due to the plethora of data and the likelihood that the forecast will be correct, this will probably have minimal market impact.

?? USD – Yesterday marked the end of Yellen’s era as Fed chair. The FOMC unanimously voted for no rate rise this month, but clearly set the stage for a rate rise in March. As this was expected, there hasn’t been much dollar movement in response, as political uncertainty still weighs on the global reserve currency.

This afternoon weaker manufacturing figures are expected to be released from the US compared to previous. This could add some pressure on the dollar.

 

Key Announcements

?? GBP
09:30am: UK Manufacturing PMI

?? USD
15:00pm: US ISM Manufacturing PMI

 

Summary: A potential dollar recovery ran into problems yesterday as it re-traced much of its gains after a fleeting bounce-back lost momentum. This was despite a hawkish note struck on the latest FOMC minutes where the US central bank suggested shaking off stubbornly low inflation could become a reality in the medium-term.
 
Elsewhere, all things Brexit seem to re-emerging with latest jousting surrounding citizens’ rights and the status of the City post-Brexit reminding us uncertainty remains. Sterling strengthened this morning despite the uncertainty caused around May’s statement concerning citizens’ rights.

 

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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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