CURRENCY MARKET SNAPSHOT
Post date: 09/02/2018 16:30
Once again, another volatile week for Sterling. Starting the week 1.5% lower against the USD and 2% lower against the EUR in comparison to the highs of last week. The EUR/USD trading round about the same levels without any drastic movements.
The UK had a quiet start to the week data wise, with Brexit talks being the main market mover against the EUR and USD. The EU ministers met in Brussels at the start of the week to sign off negotiating guidelines for a post-Brexit transitional period and state the UK’s relationship must remain broadly the same as it is now. However, the government won’t be able to take part in any decision making which has caused disagreements. This soon led to some uncertainty as Sterling started to drop off. Brexit talks soon took the back seat towards the end of the week with a large amount of data coming out on Thursday to Friday which is when we saw Sterling turn it around. The BoE raised its growth forecast for the UK economy to 1.8% this year whereas it was previously at 1.6%. The bank now estimates global GDP will grow by 4% this year. As we also know the Bank of England left the interest rates unchanged at 0.50%. However, they did hint at an earlier than expected rate hike in the future which is why we saw Stirling rise over 1% across the board towards the end of the week.
It looked positive in the Eurozone last week as usual. Day after day we are seeing data come out better then expected and signs of fast growth. Even after the UK released good news about the interest rate hike in the foreseeable future, the EUR soon bought Sterling back down to a stable level a day after this news was released. Towards the end of the week the ECB had their first larger economic meeting at the end of the week which disappointed the market with its uninspiring outlook on Eurozone inflation. They have released news that the economy is expected to carry on increasing but this will not actually turn into increased prices in Europe. This has been the main reason we haven’t seen more EUR strength over the past few days and why we have dropped off against the USD. Reports show that the Eurozone is continuing to do well, outperforming both the US and the UK so far in 2018.
The US Dollar strengthened against Sterling throughout the week after much better than expected news from the American jobs market. Reports stated that an additional 200,000 new jobs have been created during January - unemployment in the world’s leading economy is now at 4.1%. From the highs at the start of the week it has fallen nearly 300 pips after the strong jobs report. USD continued to strengthen throughout the week as traders continuously pumped money into the Dollar because of investors looking to buy bond yields. There are still talks of 4 potential rate hikes this year… it looks like it’s only a matter of time before the USD will bounce back against all currencies.