Sterling breather

14 April, 2016

Sterling has been on a slightly better footing over the past week, with EURGBP moving down from the high just above the 0.81 level and cable bouncing from the 1.40 level. But the gains are hardly anything to write home about, especially against the background of the broader dollar weakness against EM currencies and also the Aussie over the same period. Today’s MPC meeting is unlikely to upset the tone, but nevertheless in the wake of the better than expected inflation data this week will be watched for any indications on the outlook for policy ahead. There continues to be a fairly strong split between market pricing and the ‘consensus’ form analysts survey, the latter looking for the first move in rates far earlier than the market. Interest rate differentials have nudged in the favour of sterling over the past week and this suggests further near-term gains are possible for sterling. That said, the potential for further losses in the run-up to the EU referendum remains strong.

Overnight, we’ve seen the Monetary Authority of Singapore effectively eased policy overnight by moving to a more neutral stance on the currency from the previous policy of “modest and gradual” appreciation. Being such a small but open economy, the exchange rate is the main policy tool and this change in stance reflects the weakening expectations surrounding their own economy which is itself a reflection of the more uncertain global environment. We’ve seen other Asian currencies weaken in the wake of the decision by the MAS, based on the fears that this could lead to a round of competitive currency devaluations in the region (e.g. Malaysia). Expect mentions of “currency wars” to increase in the press. Elsewhere for today, we see CPI data released in the US, where the headline rate is seen rising to 1.1%. The dollar is likely to remain cautious.


Source link  
Markets look to Central Bankers

Asian Equities traded higher on Tuesday approaching near two-year highs on Tuesday as USD strength helped exporters...

Global Economic Optimism Continues

Global equities moved higher on Monday as optimism continued to improve on global economic growth. However, USD...

BOJ Monetary Policy Remains Steady

The Bank of Japan maintained their monetary policy on Friday whilst upgrading their assessment of private consumption...


Final Confirmation for a June Rate Hike

The crucial US labour market data for May will be released today, June 2nd at 13:30 BST. It includes non-farm payrolls...

GBP Under Pressure

The Brexit negotiation process is one of the focuses of the upcoming UK election. Although the Conservative Party has pledged a smooth and orderly...

Oil Slumped Post OPEC Extension

On Thursday, OPEC announced that the existing output cut agreement will be extended for an additional 9 months...


USD Bounces From Month Low

Trump administration has presented its 2018 budget plan to Congress last evening. The budget plan calls to slash $3.6 trillion...

Dollar index hit a new low

The dollar index hit a new post presidential election low of 96.95 on Friday May 19th. EUR/USD hit a high of 1.1211...

USD Hit Post Election Low

To date the dollar index has almost given up all of the post presidential election rally...

  


Share: