Heads or tails for Sterling?

30th January 2020 Market Update

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?? GBP - Sterling traded very flat yesterday which kept the Pound pinned in the region of one week lows. A lack of relevant data for the UK and a quiet economic calendar elsewhere meant that analysts were more focused on the interest rate decision today. The Government yesterday vowed to introduce a bill to end the automatic rights for EU vessels to fish UK waters. This is in response to Leo Varadkar’s comments that the UK might need to agree to a ‘fish for finance’ compromise if it wants to retain access to EU markets. The Pound did not move despite initial trade negotiations appearing difficult.

Today sees the Bank of England release its latest interest rate decision at 12:00. It will be followed by Governor Mark Carney’s press conference at 12:30. Chances of an interest rate cut have reduced dramatically from the beginning of last week which has boosted the Pound but analysts will be watching closely the split of how the members vote. It’s entirely possible that the Bank will hold but produce a dovish statement or cut rates accompanied by a hawkish statement which means Sterling is on a knife edge.

?? EUR - The Euro finished the day very close to where it started against its major peers. With a lack of data to grab the interest of traders, markets remained tightly rangebound throughout the day.
The same could be said of today with Confidence and Sentiment figures being released at 10am. These figures tend to be overlooked but the Unemployment Rate for December may provoke some movement if it deviates from the previous figure of 7.5%.

?? USD - A risk off approach returning to foreign exchange markets helped the US Dollar index to rise yesterday as analysts begin to respond to the uncertainty that the Corona virus will create in the world economy. The Chinese Yuan weakened past the key level of 7 overnight following the US Dollar index rising nearly 1% to 98.109 yesterday. The US Dollar shrugged off a mildly dovish tone from Jerome Powell in the Fed interest rate decision last night as they held rates at the current level.
Rates are likely to continue moving to respond to the Federal Reserve’s meeting last night. However, a batch of key data will be released at 13:30 which could shift the US Dollar. GDP figures for the last quarter of 2019 are expected to edge up slightly but the Core Personal Consumption Expenditure figures, which are a measure of inflation, are due to fall sharply.



GBP: Bank of England interest rate cut chances hover around 50%
EUR: Unemployment figures in focus today
USD: Federal Reserve dovish whilst holding interest rates


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