26th October 2017 Market Update
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?? GBP – Sterling had its best day in a fortnight yesterday following the publishing of the Q3 GDP figures at 09:30. The data beat expectations as well as the figure from Q2 and led analysts to believe that the Bank of England will raise interest rates next Thursday. Lagging economic growth had been seen as the final hurdle for a rate rise to go ahead.
The UK has no data releases today which could allow the pound to hold its gains from yesterday. Significant events in the Eurozone may dampen the optimism however.
Today sees the reading of quarterly preliminary GDP figures. This is forecast to be the same as previous, but any unexpected deviation could impact the pound.
?? EUR – The Eurozone took a breather yesterday with a lack of significant data released. German business climate figures were published better than expected suggesting that the bloc’s leading economy remains in good health.
Germany will be hoping that the ECB announces a tapering of its QE programme at their Monetary Policy Statement this afternoon. It has been widely suggested that the ECB will begin to remove the stimulus package this month but the devil will be in the detail of how this will be structured and the reaction of the euro remains in the balance.
?? USD – Durable Goods orders comfortably beat expectations yesterday as they rose by the most since June. This will have a subsequent effect on the overall growth figures and may assist the Federal Reserve in squeezing in a final interest rate increase this year. The US dollar gained some limited ground back against Sterling as a result.
Today features low priority weekly jobs figures which do not usually have a major impact on the exchange rate. However, a speech from Neel Kashkari in the afternoon may provide the opportunity for movement. The impending decision on the identity of the next Federal Reserve continues to have an effect on the US dollar.
13:30pm – ECB Monetary Policy Statement and Press Conference
15:30pm – FOMC Member Kashkari speech
Our View: Sterling appears to be very sensitive to the likelihood of an interest rate hike currently and exchange rate movements in the next few days are likely to closely reflect the perceived probability of this. The medium term outlook for the euro will be dictated by the QE decision today and could regain its dominant position of a few months ago.
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