(March 17, 2017) There’s been plenty for the markets to digest in the last week, the FED, the BoJ, the SNB and the BoE delivering on monetary policy decisions through the week, with the FED and the BoE having the most significant impact the respective currencies.
Perhaps the biggest surprise of the week was Forbes dissent in yesterday’s MPC, a vote in favor of a rate hike catching the markets off guard, driving cable through to $1.23 levels.
There’s little for the markets to consider for the day ahead, with key stats out of Europe and the U.S limited to the Eurozone’s January trade figures, with U.S industrial production and consumer sentiment figures scheduled for release later in the day.
The markets have been stuck in a rut through the early part of the day, the focus shifting away from monetary policy to tomorrow’s G20 gathering in Germany.
We’ve heard plenty of noise of currency manipulation, with the U.S administration having threatened tariffs on export economies deemed to be benefiting from weaker currencies. The markets will likely be somewhat wary, with concerns over a possible stand-off between the U.S Treasury Secretary and other finance ministers through the weekend holding back any major moves, the U.S administration certainly keen to peg back the Dollar from any material gains.
Thrown into the mix later today will be a meeting between Trump and Merkel, which had been postponed from earlier in the week due to bad weather. Germany was one of the economies singled out by Trump and the administration on the country’s advantageous trade terms, so it will certainly be interesting to see how discussions progress. European heads of states remain wary of the U.S administration, which has been relatively silent in the last week, with any negative comments on trade raising the possibility of a tough renegotiation of trade agreements between the EU and the U.S.
There will also need to be Trump’s view on Brexit to consider, the U.S administration quite capable of putting the EU into a corner ahead of the British government invoking Article 50 next week. Any pressure on Merkel to be reasonable in negotiations with the British government will not only be a positive for the pound, but also a negative for the EUR, the markets all too aware of the fact that it won’t just be down to Merkel on how Britain progresses on negotiations.
At the time of the report, cable is up 0.19% at $1.2383, the pound continuing to find support from yesterday’s dissent ahead of Trump’s meeting with Merkel, with the Dollar Spot Index down just 0.08% at 100.27, recovering from an intraday low of 100.16. The Dollar bulls will certainly be disappointed with events through the week and perhaps more so with the U.S administration, which has yet to deliver on the campaign pledges that opened carried Trump into office. Throw in the continued accusation of wiretapping and the general view may be that the administration is simply trying to distract the markets from the administrations failings to date, their only success being the weakness in the Dollar, which comes despite the FED lifting rates on Wednesday.