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March 2017

Sterling up as inflation picks up

Published: Wednesday 22 March 2017

  • Sterling up as inflation picks up
  • Euro improves as Le Pen forgets to mention the Euro
  • NZ ‘no change’ interest rate decision expected
By David Johnson
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The foreign exchange markets continue to operate in a range bound pattern. There was some weakness in the US Dollar as traders absorb the notion that the US Federal Reserve will be less impelled to press the US interest rate higher at the pace markets had previously forecast. The lack of significant US data is allowing the USD to weaken a tad.
 
However, as currencies are simply ratios, the USD can only weaken if the currencies it is measured against strengthen. The Euro has strengthened a little in response to Marine Le Pen not mentioning the shared currency during the live presidential election debate. Le Pen used to talk about scrapping the Euro in France, but that isn’t happening now …for the time being at least.  That has removed some of the pressure from the Euro, but there is still a month to go before the big day in France. Today’s non-policy European Central Bank (ECB) meeting won’t have much impact on the Euro and there is little EU data to speak of. Tomorrow brings the ECB economic bulletin, though. That can make for interesting reading.
 
Sterling is a little bit stronger too. There is no doubt that the triggering of Article 50 (in a week’s time apparently) could weaken the Pound in the short term, but we remain in a world where UK data forecasts are poor but the actual data beats the forecasts. Yesterday’s release of stronger than expected UK inflation data is a case in point. Whether it is enough to get more than one of the Bank of England (BoE) Monetary Policy Committee members to vote for a rate hike is another matter entirely. However, the first hint of a more aggressive BoE and the Pound will push higher.
 
Speaking of central banks, the Reserve Bank of New Zealand makes its interest rate announcement late this evening (UK time). No one is predicting a rate hike and the RBNZ would be reluctant to take any action that would strengthen the already over-valued NZD.
 
It has been a strange few days, which have tested the morals of the press and, in many cases, found them wanting. Chuck Berry did produce good music, but was a convicted child molester and tax evader and was arrested for filming women in a restaurant toilet. Martin McGuinness led a murderous gang before negotiating his and their immunity from prosecution through the UK government’s desperation to reach an accord over Ireland. Both odious men in their own way, but their flaws are largely ignored by the press.  Strange morals at work here.
 

Joke

 
A Company Director and an engineer were fishing in the Caribbean. The Director said, “I’m here because my house burned down, and the insurance company paid for everything.”
“That’s quite a coincidence,” said the engineer. “I’m here because my house was destroyed by a flood, and my insurance company also paid for everything.”
The puzzled Director asked, “How do you start a flood?” 

 

Today's Major Economic Releases
 

Market
BST
Data/Event
Previous
Expected
USD 13:00 US: House Price Index 0.4% 0.4%
USD 14:00 US: Existing Home Sales 5.69m 5.59m
USD 14:30 US: Crude Oil Inventories -0.2m 1.9m
NZD 20:00 Reserve Bank of New Zealand Official Cash Rate 1.75% 1.75%
NZD 20:00 Reserve Bank of New Zealand Rate Statement    

For more information, infographics and the latest currency insights, visit www.halofinancial.com/blog
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