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Fed rhetoric helps dollar, pound remains buoyant

16th April 2018 Market Update

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?? GBP – The pound saw further strength across the board on Friday before dropping off by the end of the day, though the pound remains relatively strong as the market has stopped trading on Brexit developments for the time being, though this is likely now to be back in the limelight as talks of the post Brexit relationship start this week.

Other than a softer house price release overnight, it is to be a very quiet day on the data front with no releases scheduled today, as such we may see some downside pressure.

?? EUR – German inflation figures for March came in as expected on Friday and Eurozone trade balance figures surprised to the upside, though both did little to help the single currency, which traded fairly flat for much of the day.

No data releases of note expected from the Eurozone today.

?? USD – The dollar gained some traction on Friday as Boston Fed President Rosengren said he expected a stronger economy than the already positive FOMC projections and as a result “somewhat more tightening may end up being needed” beyond the two further rate hikes already expected.

Today, retail sales will be released with markets expecting a stronger reading than we have had in recent months. Coupled with speeches from Fed members Kashkari, Bostic and Kaplan this afternoon we may see some support for the dollar.

 

Key Announcements

?? USD
13:30pm: Retail Sales March expected at 0.4% from previous -0.1%
17:00pm: Fed Members Kaplan and Kashkari speeches
18:15pm: Fed Bostic Speech

 

Summary: The pound jumped to new highs on Friday before we saw a technical sell off later in the day. The dollar also found further momentum on the back of some hawkish comments from Fed member Rosengren, who suggested there may be more than two rate hikes in the US this year.
 
The markets are taking the surgical strike at the Syrian regime in their stride as traders had priced in this outcome. However, it will be important to watch for any retaliation from Russia or Iran, though highly improbable.
 
UK and EU officials will start talks about the post Brexit relationship this week, these talks should also cover the unresolved Irish border issue.

 

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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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