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 pressured by Huawei problem

Alphabet and some other American IT companies have suspended business with Huawei, which is one of the first examples of major consequences for...

The climate is changing rapidly

British people need to fly less, drive electric cars, eat little meat and turn their home thermostats down to 19 degrees Celsius (66 Fahrenheit) in order to rein...

Chinese stocks saw their worst week

Chinese stocks have taken investors on a ride this year. Shanghai and Shenzhen have been the best performing global markets this year, with the Shanghai...


Risk-sensitive currencies on the rise

Stock markets show growth after the release of strong data for China and Japan as their respective PMIs were better than expected which supported...

Trump again puts pressure on OPEC

President Donald Trump told OPEC on Thursday that its members should start pumping more oil, marking his second warning to the producer group this year...

Turkish lira fell by 5% before elections

The Turkish lira dropped by as much as 5 percent against the dollar on Thursday morning, as the country gears up for elections this weekend. The greenback...


May won't ask for a long Brexit delay

Prime Minister Theresa May won't ask the European Union for a 'long' delay to the Brexit deadline, her office said, after pro-Brexit ministers objected...

Demand for safe assets grows

Markets remain under moderate pressure, despite the Fed comments. Powell's semi-annual speech in Congress reinforced expectations that the US Central Bank...

US-China trade talks: deadline postponed

China's blue-chip index jumped more than 6% on Monday morning on news that Trump would postpone of the tariff's introduction. The U.S. President...

  


Share it on:   or