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Markets waiting to see further hints of a rate hike in March

3rd March 2017 Market Update

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?? GBP – Another slow day for the pound in terms of rate movements. The GBP/USD rate continued slide for the fourth consecutive session, however there was some fight back against the euro but this was minimal.

In the morning, trading session construction data came out in line with previous month’s figure and expectations. As a result, nothing happened off the back of this and the rates stayed relatively flat. This could show signs of resilience in the UK economy, which would be positive news for the pound. However, markets still await further news from the government around Brexit and the triggering of Article 50, before showing confidence in Sterling.

Theresa May did previously give the 7th of March as a possible date for starting the formal process of leaving the EU, however this may have changed due to the recent upset in the Houses of Parliament.

?? EUR – A few pieces of euro data were released throughout the day, with the main focus being on inflation data from the euro countries as a whole, as opposed to any single country. Inflation figures came out way above expectation, moving to 2% from an expected 1.8%. This could reinforce the markets thoughts of possible tapering, from the ECB later this year.

?? USD – Positive unemployment data from the US came out in the afternoon trading session, with the amount of people filing for unemployment welfare at its lowest level in over 4 years. All eyes will stay on this figure in the medium term due to Trump’s fiscal spending programmes and promises of more jobs for US citizens.

 

Key Announcements

?? GBP
9.30am: Markit Services PMI: Expected to show slower expansion for the month of February.

?? EUR
9.00am: Markit Services PMI: Expected to remain at 55.6.

?? USD
3.00pm: ISM Non-manufacturing PMI: Expected to also show slower expansion in February.
6.00pm: Fed’s Yellen Speech.

 

Our View:  Investors feel there are still many unanswered questions and risks associated with the UK’s departure from the EU, especially with the somewhat swing in the House of Lords earlier this week, going against the elected party’s motion. This uncertainty is most likely what has caused the pound to lose ground.
 
Things may get better for the pound, once Article 50 is signed and trade agreements start to reveal themselves. However, in the near short term the markets predict sterling to be the loser.

 

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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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