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11th April 2018 Market Update

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?? GBP – Bank of England member Ian McCafferty lifted the pound after suggesting that the Bank should not dally over raising interest rates given current wage growth and the strength of the economy. Against the US dollar, the pound enjoyed its 3rd consecutive day of gains with the current exchange rate now at the best level since the end of March. Against the euro, we saw the pound trying to push above a strong resistance level without any success but it is worth noting that present rates for euros are near of its 6-month trading range.

In focus today will be UK industrial and manufacturing figures which are forecasted to come in marginally lower. However, this drop will most likely be caused due to the bad weather and thus may be disregarded by the markets and we may well see the pound continue its good run this week.

?? EUR – ECB Ewald Nowotny caused a stir in the markets at 12.30pm after stating that it was now time to “start the gradual normalisation of monetary policy” as well as suggesting the ECB could lift the deposit rate to -0.2% from -0.4%. The euro strengthened on the back of these comments.

However, four hours later a spokesperson from the ECB said Nowotny’s views are his own and they don’t represent the view of the governing council. The euro dropped off immediately after these comments going back to where it started the day.

Nothing expected today on the data front but Mario Draghi is due to make a speech at noon.

?? USD – The dollar continued its demise for the third consecutive day despite positive production inflation figures out in the afternoon. The dollar continues to be under pressure over the continuing trade-war news.

We may well see a recovery in the dollar in the afternoon should inflation figures come in line or above forecasts. February’s inflation rate was at 2.2% and analysts are now expecting it to rise to 2.4% for March further supporting the decision for the Fed to continue to raise interest rates. In the evening we have the latest Fed minutes.

 

Key Announcements

?? GBP
09:30am: Industrial Production: Expected to drop 0.4%
09:30am: Manufacturing Production: Expected to come in slightly higher at 0.2%

?? USD
13:30pm: Inflation Rate: Expected to increase to 2.4%
19:00pm: FOMC Minutes

 

Summary: ECB member Ewald Nowotny caused some swings on the euro yesterday following comments that it was time to normalise its monetary policy.
Over in the UK we had what seemed like contradictory comments from members of the Bank of England, with one member suggesting that the Bank shouldn’t hesitate to raise interest rates and the other defending the Bank’s low interest rate policy.

 

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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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