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May 2017

Weekly Currency Insights from Halo Financial

Published: Friday 26 May 2017

What to look out for this week
  • European markets remain much the same
  • Sterling slips on GDP drop and election concerns
  • Interesting times for the US Dollar
  • Canadian Dollar stronger on positive economic news
By Rachael Kinsella
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European markets remain much the same

There wasn’t much volatility this Bank Holiday Friday. European traders had time off for Ascension Day, leaving European markets fairly stable.

Sterling slips on GDP drop and election concerns

However, Sterling slipped on a Gross Domestic Product (GDP) downgrade, amidst fears that the incumbent parliament may not get the landslide victory they were expecting.

Sterling could be in for a bumpy ride again and is likely to move in the coming days, in the run up to the UK General Election, as pollsters and media discuss the strength of the various candidates and sways Sterling strength. 
 
Concerns are growing about the ability of the Trump administration to implement ambitious financial and economic reforms.
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Interesting times for the US Dollar

In contrast, the US Dollar strengthened somewhat following the US Federal Open Market Committee (FOMC) minutes, which suggested a US interest rate hike could be on the cards very soon. This was halted, however, by the news of the Federal Reserve’s proposed reduction in Quantitative Easing (QE).
 
US Q1 economic growth data showed less growth than expected and the slowest rate of growth since Q1 2016. This is certainly far removed from the market forecasts, which suggested that GDP growth would be revised upwards at 0.9 percent. These figures contrast with strong employment figures and GDP growth of 1.2 percent annually, compared to the previous month’s 0.7 percent.

Concerns are growing about the ability of the Trump administration to implement ambitious financial and economic reforms, designed to boost US business.

Canadian Dollar stronger on positive economic news

The Bank of Canada has kept their interest rates at the same level, strengthening the Canadian Dollar, alongside positive economic data and rising oil prices. 

 
Slowing of growth for the Asian powerhouse
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Chinese economic downgrade

China’s credit rating has been downgraded by ratings agency, Moody’s, for the first time since 1989, as well as amending the economic outlook to negative, as they predict a slowing of growth for the Asian powerhouse.

What will be the outcomes of the G7 meeting?

We also await the various communications from world leaders from the G7, which tend not to have too much of an impact on currency markets, but can hold insights into future policy and plans that may have more of an effect.
 
Watch out for currency volatility to protect against losses
In times of uncertainty and turbulence, it’s important to keep a close eye on exchange rate movements and consider your short-term currency risk management strategy carefully, as well as assessing longer term expectations.
 
What to look out for next week – and beyond…

Next week, at the very start of a new month, we have the global release of the Manufacturing Purchasing Managers’ Indices (PMI) on 1st June, always a useful indicator of economic clout. The Services PMI will follow on 5th June, also holding important insights on the strength of world economies, industry challenges and opportunities. Then we will have the much-discussed UK general election on 8th June, which is bound to cause market volatility.

Should be interesting! In the meantime, enjoy the weekend and if you are in the UK or US, enjoy the Bank Holiday.

Bank Holiday Jokes:

One seventh of your life is spent on Monday.  However, the only person to get his work done by Friday was Robinson Crusoe.

If a train station is where the train stops, and a bus station is where the bus stops, what is a work station?

I've just been on a holiday of a lifetime. I'll tell you what, never again."

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