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February

Brexit is the word, as always…

Published: Wednesday 27 February 2019

  • A rocky ride ahead for the US Dollar
  • Canadian Dollar boosted by rising inflation
  • Data a-plenty
  • Dollars Down Under back in the doldrums

We wait eagerly for the outcomes of today’s parliamentary votes in the UK and will provide an update when we know the score. As we always seem to see when there is a glimmer of hope for a deal or delay where Brexit is concerned, markets move: the Pound has picked up and smashed through several significant rate markers against its key currency pairings. Right now, it looks hopeful – as even US President Trump starts to pile the pressure on the EU by threatening future trade tariffs. If some form of an agreement is reached and some certainty emerges instead of the endless uncertainty, Sterling could strengthen further still. Any negative news, however, and we’ll be back to a beleaguered Pound.
 
Be prepared! There’s going to be considerable exchange rate volatility across the board this week and next. It’s well worth speaking to your currency specialist now to plan for any currency transfers you need to make now and in the coming days.


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A special relationship
 
The Bank of England appeared to be playing its part in strengthening US-UK alliances in Governor Mark Carney’s speech on Monday 25th February. The speech focused less on monetary policy and the usual gloom and instead confirmed that London will still have the infrastructure in place to support its status as a global financial centre after Brexit, with assurances of a US derivatives trades deal for many years to come. This should also provide some more confidence for UK businesses, who are understandably fed up about bearing the brunt of Brexit uncertainty.
 
And speaking of special relationships, Trump is in North Korea and could be brokering an alliance there. I can see volatility on the horizon in more ways than one…
 
UK flag, EU flag and St. Paul Catherdral
 
A rocky ride ahead for the US Dollar

There’s heaps of US data ahead this evening, later this week and throughout next week. US-China trade and the US’s political alliances are the big stories for the US Dollar and all the commodity currencies this week. However, there is some important data expected next week with the latest consumer confidence results for the US, and we will see Gross Domestic Product (GDP) figures for the US tomorrow evening, so there is plenty more volatility ahead for the currency markets.

Less favourable than expected data has contributed to a fall for the US Dollar in recent weeks. There is a sense of nervousness in the air regarding the US economy, with several major banks downgrading growth forecasts and central bank meeting minutes highlighting concerns over risk and barriers to growth. A perfect storm to knock the US Dollar off its pedestal, but we know the markets move fast; how long will it last?

Canadian Dollar boosted by rising inflation

North American neighbours, Canada, received some good news for the Canadian Dollar, as inflation continued to rise in January 2019 close to target levels. This signals a stronger start to the year for the Canadian economy and less urgency for the Bank of Canada to change monetary policy.

Data a-plenty
 
There’s plenty of economic data coming at the end of this week to test the Euro, too, as we have the Manufacturing Purchasing Managers’ Indices on Friday, along with the Eurostat monthly unemployment report, which is expected to be positive, compared to December’s ten-year low.

Dollars Down Under back in the doldrums

The Australian Dollar has fallen off the back of poor construction data. With the economy already very concerned about the housing market, the figure was a shock disappointment at -3.1%, instead of the forecast 0.6% growth, and this knocked confidence concerning the AUD.

In neighbouring New Zealand, a wider trade deficit – the widest for 13 years – also knocked down the New Zealand Dollar and has provided the New Zealand central bank with a monetary policy quandary. Concerns about the Chinese economy and the effects on the countries that are most closely tied with Chinese trade are having a noticeable effect across Asia Pacific.


#WednesdayWisdom

 
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