The dollar weakened last week on the dovish message following the Federal reserve meeting. The weakness was relatively short lived as traders begin to price in the prospect of higher rates at some point later this year. Over the weekend a couple of Fed Presidents noted their expectations to raise rates later this year and attention will now turn to the other Fed speakers this week with Janet Yellen due to make a speech on Thursday. I would expect most of them to stress that the timing of a move will be data dependent but with the markets currently not pricing in any rate rises this year, there could be scope for a broader dollar rally if and when the economic landscape improves.
It's a relatively quiet week ahead in the UK, but Sterling will remain in focus after Andrew Haldane, the Bank of England's Chief economist, argued that interest rates in the UK could turn negative in order to protect the economy. He believes the balance of risks to UK growth and to inflation are skewed to the downside and as a result there may be a need to loosen rather than tighten policy over the next few months. That is a view that is at odds with most of his colleagues on the Monetary Policy committee. It shows that Sterling is not a one-way bet and that the road ahead is not set in stone. Current levels should not be taken for granted.
Unusually the Greek election passed us by with little fanfare with hardly any impact on currency markets. Alexis Tsipras was returned to power in an unexpectedly decisive win. He now has a clear mandate to continue with the austerity measures imposed on him and has vowed to complete a full term. Volatility for the Euro will likely hinge around officials due to talk later today and Draghi speaking on Wednesday. Communications are expected to be dovish especially as the Euro has remained stubbornly high ahead of the expansion of QE due in December.