USD bounces back, GBP rallies on Brexit optimism
GBP has found fresh upward impetus as one Brexit hurdle seems to have been jumped, but is this a temporary reprieve?
The USD re-gained ground last week as investors increased expectations of hawkishness from the Fed.
USD:
The markets seem convinced that the US central bank will continue to tighten its monetary policy to bring inflation down back to the 2% target. The bets were reaffirmed by the stronger US PCE Price Index last week, which indicated that inflation isn’t coming down quite as fast as hoped.
This has pushed USD/JPY to multi year highs as the Central bank Governor was extremely dovish in an overnight speech).
A strong USD has also had the knock-on effect of pressuring commodity currencies (NZD / ZAR / CAD).
Main event of the week:
Manufacturing data (Wednesday 1 st ) / Services Data (Friday 3 rd )
GBP:
Progress was made with the EU and the Irish border issues that have plagued the UK since Brexit. GBP/EUR climbed 100 ticks to the 1.1375 level and GBP/USD recovered from 1.1900 to 1.21000. Tomorrow (Wednesday) Governor Bailey speaks regarding the economy, with the FX market wondering if this GBP rally will last in the medium term.
Main event of the week:
Speech (Wednesday 1st)
EUR:
After continued aggressive hikes and rhetoric, EU Economy Commissioner Gentiloni said “EU is likely to avoid a severe recession” this morning. This boosted the Euro, with EUR/USD pushing above 1.0600.
This Thursday’s Inflation data will be closely watched for further evidence of a decrease in inflation.
Main event of the week:
Inflation (Thursday 1 st ) / Retail Sales (Monday 6 th )
AUD:
AUD: A big week this week as GDP is released tomorrow & next week, with Tuesday’s interest rate decision and a speech from the central bank.
Main event of the week:
GDP & Inflation (Wednesday 1st) Interest rates (Tuesday 7 th )
