The Pound climbs higher, while the USD faces volatility ahead of interest rate talks
New daily email launch
Currency Solutions is happy to announce the launch of our new look daily email. From today we will be sending newsletter subscribers the new format which will replace our old daily newsletter format.
The new email format takes onboard feedback from our customers and provides daily updates in a more streamlined way. The three areas we will be covering are what’s been happening recently, what coming up and a table of rates for our most common currency pairs.
What’s been happening?
The pound enjoyed the limelight for the majority of last week appreciating 2% against the greenback before coming off its highs of $1.4216. Sterling’s break out of its $1.40 comfort zone was attributed to a number of factors: trade war issues in the US resulting in investors selling the dollar, two members of the Bank of England’s policy committee voting in favour of an interest rate hike, which was unexpected, and a transitional deal for Brexit being agreed in principle meaning that the UK will remain part of the EU for another 21 months post March 2019.
The greenback has been facing volatility, regularly due to President Trump’s actions that have been weighing heavy on the dollar this year. Trump is set to clamp down and expel dozens of Russian diplomats in the wake of the controversial nerve-gas attack which took place in the UK against a former Russian spy. Furthermore, the US has trade war concerns to contend with. In response to recent US tariffs China has imposed $3 billion worth of tariffs itself on the US confirming that it “doesn’t want a trade war, but it’s not afraid of a trade war.”
The euro has flirted with the lofty heights of 1.15 of late and remains range bound at present. The biggest driver for the euro is still Brexit, but in other news it’s looking ever likely that Italy could soon have a new government formed between, what most would consider, ‘long-shots!’ The concern for the euro and the eurozone is that The Five Star movement and The League have both criticized the EU and its policies. With the euro showing some vulnerability last week in the face of slow manufacturing and services data, the last thing it needs right now is noise from a government looking to have impact from the get-go.
|GBP ► USD|
|GBP ► EUR|
|EUR ► USD|
What’s coming up?
The UK economy has been printing some positive figures of late with UK average earnings pushing higher. This has poured fuel on the interest-rate-hike fire as the market now expects the UK to raise rates when the BoE meet 10th May this year. There is also the possibility that push higher on interest rates could continue with another to follow early next year.
This week the dollar will be dictated by Fed member speeches and GDP. Today will see the turn of US Fed members Dudley and Mester speaking. The market will pay close attention to their tone and language in relation to interest rates and time frames. When the Fed met for the first time under new Chairman Jerome Powell they raised their target range by a quarter of a point to 1.75% in line with market expectations. They further projected a steeper path of hikes in 2019 and 2020 noting improvements in the US economic outlook in the form of a robust job market, firm consumer spending and wage growth on the up.