blackfriars bridge evening

Sterling showing signs of altitude sickness

28th February 2019 Market Update

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🇬🇧 GBP – Sterling continued its rapid ascent yesterday as it built on gains from Tuesday. Momentum has been built as a result of a delay to the Brexit deadline looking almost inevitable and the possibility for the first time that no deal will be taken off the table of options for the UK Government. Sterling has been held artificially lower due to these concerns and markets have jumped on the opportunity to buy the Pound. Previous highs were smashed aside as Sterling sits at its best level against the Euro since May 2017 and the US Dollar since July 2018. The key point from votes in Parliament last night is that 100 MPs did not vote for the delayed amendment that the Government had supported. This could cause May and her team difficulty when negotiating the length of delay to the Brexit deadline.
There is a complete lack of data from the UK today and so market attention will be firmly on Brexit headlines. Analysts may have concluded that the top of the market has passed as a retracement has begun this morning. Further information on the votes going through between March 12th – 14th will be seized upon.

🇺🇸 USD – The Greenback drifted off 3-week lows yesterday as Fed Chair Jerome Powell confirmed that the committee would be patient in its plan for further interest rate hikes, which could cause the Dollar to slip in the medium term. Yesterday’s Factory Orders for December did little to change expectations for the US economy.
Trump and Kim Jong Un’s meeting has been cut short this morning which may assist the US Dollar if investors increase their appetite for safe-haven currencies. Today sees Personal Consumption Expenditures results being published for Q4 which are expected to dip slightly, and Annualized GDP is also expected to drop significantly which could spell another difficult day for the US Dollar. A handful of Fed member speeches may create some movement later in the day.

🇪🇺 EUR – Eurozone economic data was mixed yesterday which brought about a directionless day for the Euro against the US Dollar. The Euro has lost significant ground against the Pound which is an isolated move and is having a quiet week against its other major pairs.
Today sees growth and inflation figures from individual European nations rather than the Eurozone as a whole. Although these results have a lesser effect, analysts will be looking for signs of weakness in the individual economies that might prevent the ECB starting to raise interest rates. The results are expected approximately in line with the previous readings, but any variation will create volatility.

 

Summary:
GBP: Has reached 21-month highs but may have now peaked
USD: On the back foot in recent days and data could compound this today
EUR: Eurozone having a quiet week in terms of data and currency movement

 

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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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