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Daily FX Update – 13th February 2017

So the much anticipated Trump inauguration came and went with little fanfare and for the Dollar bulls a little disappointment, as Trump did more to please the crowd than focus on economics. That theme has generally remained through his first weeks in power as focus has centred away from fiscal policy and more on domestic and PR! That was until last Friday, where the Trump rhetoric bandwagon was full steam ahead with the promise of a big tax announcement in the not too distant future. Both stocks and the Dollar responded well to this news but as always, the devil will be in the eventual detail.

At present, we remain confined to familiar ranges, albeit some of the power has been handed back to the majors as President Trump gets his feet firmly under the table in the Oval Office. None more so than the Pound which broadly defied Dollar strength post the upside surprise in ADP payrolls as well as a reasonable non-farm payroll print. A decent manufacturing PMI print in the UK has also buoyed the Pound of late – poignant as we moved in to Bank of England interest rate decision. Whilst there was no change, growth and inflation expectations are beginning to build which is leaving the MPC with something to think about which Carney highlighted at the start of his press conference stating that the MPC’s patience on above target inflation remains. GBP has subsequently given back some of the 7 week highs that it had set that day but nonetheless, it keeps its head above water against the Dollar and the single currency.

No news however is good news and the word Brexit has been somewhat buried for a few days. As the deadline grows closer, Sterling volatility is likely to increase so hedging at costed levels is a prudent strategy. 

It’s a big week for data releases as well as speakers. Yellen will deliver her semi annual testimony to Congress on Tuesday and Wednesday which will be monitored for clues on what’s ahead for monetary policy, particularly in light of Trump’s announcement last week. Other US data this week includes industrial output and CPI numbers. We also have UK retail sales, CPI and employment numbers, all of which will be closely monitored to gauge possible implications on our domestic monetary policy. 

Have a great week.

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