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Has Sterling shot its bolt?

29th January 2018 Market Update

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?? GBP – The pound benefited greatly last week from a combination of factors, particularly versus the US dollar. A perceived political shutdown Stateside caused investors to switch their allegiance towards the euro, weakening the greenback considerably. Additionally, a lack of Brexit output perhaps resulting in encouraging economic data actually being factored in has lifted Sterling.

However, Brexit reared its head again late on Friday, following a Commons update from David Davis. This caused the pound to lose significant ground, though it remains largely buoyant compared to moving averages of the past few months.

This week sees little key UK data until Thursday and Friday, with Manufacturing and Construction PMI figures due respectively. It should be noted that Mark Carney is speaking at close of business on Tuesday afternoon.

?? EUR – There has been little to write about the single currency recently, with little happening in the zone. However, last week brought some further backing to a consistently strong euro, with Mario Draghi stating that inflation is to remain relatively low and QE stimulus is to be scaled back.

There is no data due out today.

?? USD – The dollar has seen a steady decline throughout last week, with confidence in the world’s reserve currency draining away in the wake of political upheaval and lack of direction. Despite largely encouraging economic indications and the prospect of at least a couple of interest rate increases this year, the greenback is not currently proving attractive. However, the signs are that we have seen the worst of the dollar weakness in the short term.

No data is expected today.

 

Key Announcements

No key announcements today.

 

Summary: After enjoying quite the rally last week, the pound came back down to earth with a bump on Friday, losing ground during afternoon trading. Closing levels have been maintained so far this morning. With no major economic fundamentals due in the UK until Thursday, we may see Sterling struggle to keep buoyant.

 

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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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