Daily FX Update – 16th February 2017

A strange couple of days with solid fundamentals out of the US, a slightly hawkish Yellen which increased the odds of a March rate, yet a softer Dollar? A sign that the shift is focusing away from monetary policy determining the strength of a currency? In my opinion not. The market is in somewhat of a fickle, complacent view at the moment and usual service should resume. Trump’s tax announcement is due and we also can’t forget that the Dollar rally has been fairly immense but yet we still remain confined to ranges and not breaking out so for now at least, the picture remains unchanged and the Dollar is likely to stay in charge.

The Pound continues to pivot 1.2500 against the Dollar with it taking a dip following softer than expected inflation. It did come in at its stronger than the previous 1.6%, printing 1.8%, but it did miss expectation of 1.9%, a likely welcomed number for the Bank of England who face a delicate juggling act between managing growth and inflation. A decline in unemployment helped the Pound fight back a little but real wage growth remains sluggish at best so the Pound continues to tiptoe for now.

Focus today turns to EU inflation data this morning following by housing starts and initial jobless claims from the US this afternoon. The G20 foreign ministers meeting also takes place so geopolitical issues that have been on the wires of late, particularly surrounding Russia and the US will also be in focus.

Have a good day.

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