FX Monthly Outlook - February 2019

5 February, 2019

The first trading month of the year did not see any significant surprises.


Brexit developments made the headlines after Prime Minister May’s Brexit deal did not get the vote. While PM May managed to survive a vote of no-confidence, the Brexit talks are back to square one.

The U.S. government continued with its partial shutdown due to the deadlock of talks between the U.S. Congress and President Trump. The shutdown, the longest so far, will impact the U.S. economy’s growth during the first quarter of the year.

The Federal Reserve held its monetary policy statement in January. No changes were made to monetary policy as the next meeting is due only in March. The ECB also had its monetary policy meeting last month which turned dovish.

The ECB President Mario Draghi expressed concerns on the downturn in the economy for the Eurozone. Talks about revitalizing the ECB’s Long term refinancing operations are on the cards, but nothing concrete has materialized yet.

Among the currencies, the top performing asset last month was the Canadian dollar. The CAD gained, tracking the rise in crude oil prices. Next in line were the commodity currencies such as the AUD and the NZD.

The month ahead: February 2019


The month ahead should be relatively quiet. The short month is not likely to see any significant changes from central banks. The only exception will be the RBA, the RBNZ and the Bank of England.

The Brexit developments will take the front pages as the deadline for the UK leaving the EU is on March 29.

February will see plenty of economic data released which should cover the fourth quarter financial performance. With not many central bank meetings lined up this month, policymakers will be taking a close look at the economic performance of the fourth quarter of last year and for January.

Here’s a quick overview of some of the important line up of events for the month ahead.

Central bank meetings – No changes expected


The Reserve Bank of Australia, the Reserve Bank of New Zealand and the Bank of England will be holding their monetary policy meetings. The RBA and the RBNZ should leave the status quo unchanged.

The recent surprise, a pick up in inflation in New Zealand is expected to keep the RBNZ to maintain its official forward guidance of maintaining interest rate stability. The prospects of a rate cut have diminished since inflation has inched closer to the RBNZ’s inflation mid-point.

For the RBA, a similar story comes out with the economic data not showing much for the central bank to prompt a rate hike. As a result, the RBA is also expected to not make any significant changes from its previous monetary policy guidance.

Bank of England – Will rate hikes resume?


In spite of Brexit uncertainty, recent trends in the UK turned out positive concerning employment and inflation figures.

The Bank of England will be holding its monetary policy meeting this month. Given that inflation eased back, just sitting close to the BoE’s 2.0% inflation target rate, the Bank’s meeting will be closely watched.

The uptick in the inflation and unemployment data signals that the BoE could come out hawkish on interest rates. The uncertainty due to Brexit will, however, keep policymakers in check.

With less than a month to go before the Brexit deadline, the BoE might leave interest rates unchanged at this month’s meeting, but could potentially signal few more rate hikes during the remainder of the year.


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