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June

Geopolitical discussions, decisions and dialogues shaping the currency markets

Published: Thursday 14 June 2018

  • Could storm clouds be hovering over the worldwide economy?
  • Sterling somewhat stronger on positive data
  • All eyes turn from Federal Reserve to European Central Bank
  • Disappointment Down Under
Could storm clouds be hovering over the worldwide economy?

Trade tensions and disappointing data are hinting at the storm clouds that the International Monetary Fund (IMF) is predicting. Currencies have been playing the waiting game in anticipation of key central bank and data announcements, with the Federal Reserve and European Central Bank in play this week. We have seen the calm before the storm. Markets watch and wait for the ripples of excitement to come…

Sterling somewhat stronger on positive data

The Pound started the week in a slump, as the UK trade deficit widened and underwhelming UK growth data was released. Employment remains strong in the UK, however, and the Pound managed to claw a little strength back in anticipation of last night’s US interest rate results, also enjoying a little lift from positive Retail Sales data this morning. 

UK Inflation data released was, as the markets expected, much the same as the previous figure, still at a year-long low. With oil prices soaring, petrol prices are putting the squeeze on consumers, along with rising home energy costs. 

Retail Sales data – usually a strong indicator of UK economic health and the overall mood of the nation – showed a significant uplift for May, as sensational summer weather and the Royal Wedding boosted sales of food and drink, DIY and garden wares. However, Sterling is open to Brexit and economic shocks amid current political uncertainty. 
 
Euro notes with coins
 
All eyes turn from Federal Reserve to European Central Bank

The currency market’s eyes were trained on the US Federal Reserve Open Market Committee (FOMC) interest rate decision yesterday, pointing out the way for the US Dollar and therefore a host of other currencies. 

The FOMC decision on interest rates was one of the hottest topics of the week, with the expected rate hike of 0.25% taking place and priced in to the markets. The way the vote goes and any nuggets of information from the FOMC’s statement are usually full of clues for investors and provide signs of policy and process to come. Any sign of caution could weaken the US Dollar; but the more hawkish approach announced helped the US Dollar climb back up again. However, current trade concerns are putting pressure on the US Dollar; and any US Dollar weakness should help the USD’s currency partners to strengthen in the uncertainty. 

Disappointment Down Under

Across the globe, the typically buoyant Australian Dollar has suffered from poor business confidence and falling house prices, alongside the Reserve Bank of Australia governor pouring cold water over the Australian Dollar by pointing to interest rate rises being a long way off yet. Elsewhere in Asia Pacific, Chinese economic data disappointed again, with implications for the Australian Dollar and other commodity currencies. The Australian Dollar remains subdued as the weight of poor domestic data and the close trading relationship with China adds pressure.
 
Ups and downs for the Euro
 
The Euro started the week on a high, with strong retail sales and employment data and high hopes for the European Central Bank (ECB) policy meeting. The Euro had some help from a resolution to the Italian parliamentary problem, but has been suffering from data disappointments from the Eurozone’s major economies, particular Germany and France.

The Euro crept up against the US Dollar in the run up to the big Federal Reserve announcement on Wednesday. All eyes now turn to the European Central Bank policy announcement and press conference – the Euro is steadily picking up in anticipation.

#ThursdayThoughts

"When you're on a merry-go-round, you miss a lot of the scenery." - Neil Diamond
 
For more information, infographics and the latest currency insights, visit www.halofinancial.com/news