wall street

Trade war relief increases appetite for the dollar

21st May 2018 Market Update

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?? GBP – Confusion over whether Britain will stay in the customs union weighed on the pound on Friday as the currency headed towards fresh five-month lows against the US dollar.

Continuing soft UK economic data, a dovish Bank of England and concerns over the UK labour markets has put pressure on the pound over the last month. Sterling bulls will be hoping for readings for inflation and retail sales to come in positively this week to bring the pound out of its recent turmoil.

Nothing due out today.

?? EUR – Italy 10-year bond yield dropped on Friday amid concerns over Italy’s political future. As a result, the euro dropped, with investors seeking the higher yielding dollar instead.

On the data front, the only thing notable will be Wednesday manufacturing and service sector figures.

?? USD – Dollar demand continued as US 10-year treasury yields continued to soar increasing appetite for the US dollar once again.

The dollar has already started the day on the front foot as tensions over a trade war between America and China ease. Both the pound and the euro are now at a five-month low against the currency.

Wednesday may well prove to be volatile as we see the release of service and manufacturing figures in the afternoon and later in the evening we see the release of the FOMC minutes.

 

Key Announcements

No key announcements today.

 

Summary: Sterling finished the week on the back foot dropping marginally by the close of play on Friday.

The only notable data out on Friday was Canada’s inflation figures which came in lower than expected.

 

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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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