Pressure and strong market movements

Currencies Direct February 13th 2017 - 2 minute read

European shares rose to within striking distance of their highest levels in more than a year on Friday and the US dollar was buoyant as investor’s cheered upbeat Chinese trade data and hope of business-friendly tax cuts in the US.

President Trump announced on Thursday that over the coming weeks, he would announce something “phenomenal” in regards to tax. Further speculation that Trump’s policies would help boost economic growth and inflation managed to actually push US treasury yields higher and gave the USD a bout of strength.
Strong Chinese trade figures released Friday also added to the feeling that inflationary pressures could be brewing.
Sterling fights back

Looking at the past week of trading, we’ve seen Sterling fight back to remain on steady ground against all of the major currencies. There was a rally in GBPEUR from the mid-point of the week due to a weaker euro and Sterling holding value, despite the lack of macro stimulus.

GBPUSD also remained fairly flat for the most of the week, trading within narrow ranges bar Tuesday when there was a swift tumble on the open which later recovered to even higher levels before close of play. The recovery was attributed to comments from a member of the Bank of England’s monetary policy committee who suggested that interest rates may need to move higher sooner than currently expected.

This week, we can expect a more volatile market with a much busier schedule on the macro-economic calendar.
USA: The Fed speaks out

After a quiet week which seemed to focus more on the commodity currencies than the majors, on Tuesday and Wednesday of this week, Janet Yellen of the Federal Reserve is due to testify before the Senate Banking Committee and the House Financial Services Committee. Should she give a more hawkish tone, we can expect the US dollar to strengthen further, directly impacting GBPUSD and EURUSD negatively.

Furthermore, we could expect to see reaction in the US, following Trump’s announcement via Twitter, that he will reveal major tax revisions soon which actually prompted a further equity market rally with the S&P 500, Nasdaq and Dow Jones Industrial Average all posting record highs.
Eurozone: the data amongst Brexit

While the UK’s leave from the European Union has impacted the markets, we can’t forget about other the figures and general economic gauges within the EU continuing to affect markets. Furthermore, it looks to be that the current situation is set to improve after the Sentix headline index for the Eurozone experienced a slight setback in February (-0.8 points) while in contrast, the current situation value increases 4 points and has reached the highest value since May 2011. We can expect to get a broader insight into the Eurozone’s recovery and possible FX stance next week with the EU Economic Forecasts on Tuesday and the ECB Monetary Policy Meeting on Thursday. We’ll also have a much busier schedule in terms of the macroeconomics.

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