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January 2017

US Dollar extended its recent slump

Published: Thursday 26 January 2017

  • US Dollar extended its recent slump
  • Theresa May promises white paper on UK’s Brexit plan

The Pound is trading at a six-week high versus the dollar after an aggressive run over the past week and a half, and this can open the door to an upward trend continuing.  GBP-USD is back past the 1.26 interbank level, this morning seeing fresh 2017 highs of 1.1785 against the Euro.  The Pound is the strongest currency of the day up 0.8 % against Dollar and 0.61% against Euro. Sterling also saw its largest gains against the Australian Dollar at 1%, so it is a good time for currency buyers to consider reducing their exposure.  Again, weak UK data could mean that Sterling’s strong run may stall with Gross Domestic Product (GDP) figures due to be released later this morning.

A lot of this activity is down to the fact markets prefer certainty. The Supreme Court ruled that the government will need approval from Parliament to trigger Brexit, which is seen as positive for Sterling. This was seen as making a ‘soft Brexit’ option more likely. However, the Supreme Court also decided not to force the government to put Article 50 to a vote in the devolved parliaments in Scotland, Wales or Northern Ireland, triggering a fall in Sterling against both the US Dollar and the Euro. However, now it seems investors have decided to focus on the clarity given by the decision.  After all, although it lost the court case, this was what the government was expecting, and for weeks it has been preparing to bring laws to the UK Parliament to start the Brexit process. Yesterday, UK Prime Minister May promised a white paper on Brexit, which will contain her “bold” proposals for negotiations with the EU – hopefully providing even more clarity. 
 
The New Zealand Dollar rallied against its peers after better than expected Consumer Prices Index (CPI) data, Government bond yields improved, confirming that The Reserve Bank of New Zealand (RBNZ) rate hike expectations are building. Markets are pricing in at least one rate hike in the next 12 month.  

We are awaiting a raft of data today, beginning with UK preliminary GDP, which is expected to have to have risen 2.1% year-on-year, slightly down from 2.2% in Quarter 3. Later this morning, the Eurogroup meets in Brussels and European Central Bank (ECB) Executive Board member, Yves Mersch, speaks in Luxembourg.

This afternoon brings US trade figures and labour data, which are unlikely to move the market.

Happy Australia Day to our readers Down Under. Hope you’re enjoying the hot weather? Jealous, us?
 

The Addicted Golf Player


Two guys were playing golf, one of them was about to swing the golf club when he noticed a funeral procession going by on the street.

The man stopped in mid-swing and closed his eyes and said a short prayer. The other man truly inspired, remarked, clearing his throat, “wow that was one of the most beautiful things I have ever seen.”

“Well”, the other man said “I was married to her for 35 years.”

 

Today's Major Economic Releases
 

Market BST Data/Event Previous Expected
EUR All Day EU: Eurogroup Meetings    
GBP 11:00 UK: Confederation of British Industry Realized Sales  35 28
USD 13:30 US: Unemployment Claims 234k 247k
USD 13:30 US: Goods Trade  Balance -66.6b -64.8b
USD 14:45 US: Flash Services Purchasing Managers' Index 53.9 54.4
USD 15:00 US: New Home Sales 592k 585k
USD 15:00 US: Conference Board Leading Index 0.0% 0.5%
 
Daily Currency Analysis by Mike Mistretta 
 
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