Sterling lower on profit-taking
March 1st: Highlights
- Uncertainty remains over the type of Brexit that will be achieved
- U.S. GDP stronger than expected
- Euro hopes resting on global trade
The Real Countdown begins
As a nation, the British have always relied upon their Members of Parliament to ensure the protection, progression, and devotion to duty. Unfortunately, whether one is Remainer or Brexiteer, it is the view of the majority that Brexit has been handled abysmally almost from before the referendum.
A simple in/out referendum was Cameron’s promise but it lacked imagination and consideration. With hindsight, it was naive in the extreme to either expect Parliament to be able to agree on a deal with Brussels and also similarly disingenuous to allow it to become a Party-political issue when it hadn’t been a Parliamentary issue to begin with.
So as March begins we can expect several twists and turns but can we expect a deal? We will have to wait and see.
Yesterday, the market either took profit on positions established when it became clear that no deal was slipping from the table or decided that the optimism that there would in all likelihood be found simply evaporated.
It fell to a low of 1.3253, closing at 1.3265. Over the month, it traded between 1.3351 and 1.2773.
U.S. GDP beats expectations
The data is another testament to the new patient stance being taken by the FOMC. This is now likely to last until the end of Q2 when the nature of growth is understood.
With next week’s employment report likely to be the most “accurate” so far this year, any fall in the headline and/or a significant revision in the January release could see the Fed under pressure.
The dollar index was unchanged on the back of the data. The economic optimism was offset by the increase in global risk appetite despite the end of the U.S./ North Korea summit early with no agreement.
A quiet start to the month is expected with PCE inflation data expected to be unchanged at 1.8%, leaving price inflation well below the Fed’s 2% threshold.
Euro tied to global expansion
After an extended period where the only driver or otherwise of global growth has been the trade disagreements between China and the U.S., there has been a similar downturn in activity in the Eurozone and the value of the single currency.
It is now a well-known fact that the fate of the Eurozone is inextricably tied to that of global trade. The Eurozone attempts to be the most open market place with wide-ranging agreements across the entire globe. As markets start to open again if the U.S. and China reach an agreement on trade then the Eurozone should start to flourish again.
The one downside of this policy is that global trading power is held in a small group. If the U.S. decides to punish a nation and create trade tension or sanctions with, for example, Iran is made tighter by the U.S. then the Eurozone is headed for more of a recession than the downturn currently being experienced.
Employment data is to be released across a number of nations tomorrow and a continued rise in jobless particularly under 25’s is expected.
Yesterday, the euro reached a low of 1.1359 and closed at 1.1379.
Have a great day!
About Alan Hill
Alan has been involved in the FX market for more than 25 years and brings a wealth of experience to his content. His knowledge has been gained while trading through some of the most volatile periods of recent history. His commentary relies on an understanding of past events and how they will affect future market performance.”