- Pound is pounded by Brexit negotiations… again
- Euro drops on poor inflation figures
- Things are looking up for US Dollar and US economy
By Ricky Nelson
Pound is pounded by Brexit negotiations… again
Sterling fell after comments from EU Brexit Minister, Michael Barnier, who stated that there are still some significant disagreement between the EU and the UK over the terms of the transition period. The infighting within the Conservative Party has caused wide divisions among the Cabinet and it remains to be seen if Prime Minister May can negotiate a truce internally, let alone a deal with the EU that would be palatable with all the factions in her own party. Markets will be looking ahead to Mrs May’s speech on Friday, which should give us more clarity on the issue; and for the time being, the Pound will be vulnerable to any external Brexit shocks.
Euro drops on poor inflation figures
The Euro fell yesterday and is now just above 1.22, which we haven’t seen since early February. The recent move lower was due to weak German inflation data, which showed that prices have slowed to 1.4% versus an expectation of a rise to 1.6%. Markets had been buoyed recently by stronger Spanish inflation prints and hawkish remarks from the European Central Bank's (ECB) Weidmann. Today’s Eurozone Consumer Price Index (CPI) and German unemployment data will dictate near term direction for the single currency; a weaker set of figures could open up a test of 1.20.
Things are looking up for US Dollar and US economy
The US Dollar made gains overnight as new Federal Reserve Chairman Powell testified to the House Financial Services Committee. Mr Powell reiterated the view that further gradual rate increases will be required. According to Mr Powell, the outlook for the US economy has strengthened since December and he was keen to stress the need to avoid an overheating economy. The markets are pricing in three more interest rate hikes in 2018 and the US Dollar looks set to continue its rally in the short term.