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Angus Campbell

BOE Inflation Report sees lower UK growth

Unsurprisingly we have seen the BOE reduce their growth forecasts today and they remain concerned over the supply element of the labour market feeling it will continue to cap wage inflation. However, their inflation projections were broadly unchanged and the theme from the press conference has been that they do expect wage growth to accelerate and inflation to pick up noticeably with pressure building. Sterling against the dollar has erased most of the gains it made following the strong wage ...

Simon Smith

Early dollar strength

We're seeing some early dollar strength coming through, principally vs. the EUR and JPY, but the kiwi and Aussie were also under pressure during the Asia session in the wake of the disappointing trade data from China. USDJPY is making new highs for the month, above the previous reading of 120.74, whilst EURUSD has fallen for the sixth consecutive session to threaten a move below the 1.05 level. The euro move is also being helped by the further crushing of yields in the Eurozone. The betting is ...

Simon Smith

Sterling lower on weaker inflation data

Sterling initially recovered the initial losses seen on the back of weaker than expected inflation data, but is now down to the 1.49 level as some residual dollar strength comes through. This showed the headline rate falling to zero in YoY terms, with the core rate falling to 1.2%, from 1.4% in the previous month. The latter number is important because it has been rising over the previous two months, so this has now been unwound and undermines, to a degree, the notion that the inflation we are ...

Simon Smith

Shaking off Greece

When it comes to the single currency and Greece, the one thing to know is that trading Greece on the back of Greek developments is a frustrating road to ruin. Just as Greece hits the headlines once again regarding its ability to pay upcoming obligations, the single currency has continued its move higher, both against the dollar together with sterling and the yen. Merkel and Greek PM Tsipras meet later today to try and iron out a way ahead. At present, EURUSD is within the range seen last ...

Simon Smith

Fed drops ‘patient’ guidance – dollar initially weaker

The initial reaction to the Fed's decision to drop the reference to being 'patient' in its post-meeting statement has been for the dollar to weaken, seemingly on a classic "buy the rumour, sell the fact" move. Although the wording, introduced at their December meeting, has been removed, the Fed have underlined that "This change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range". This is another reason for the ...

Angus Campbell

Markets react positively to UK Budget

The Chancellor reduced his surplus target of £23 billion in 2019/20 and announced some tax give aways that look to have been received well by the markets. Sterling is a little stronger with GBPUSD rising from 1.4640 at the start to 1.4670 and the FTSE 100 rallying from 6895 to 6908. Now we can focus on tonight's FOMC meeting which could be a big market mover, where once again investors will want to see evidence of when we can expect the first rate hike, at a time when many other central banks ...

Simon Smith

The only way is down for now

For the single currency, down appears to be the path of least resistance, the daily chart showing only one positive close so far this month (Monday) on EURUSD. For sure, this has been a time of dollar strength, helped by the latest US employment report, but only the Norwegian Krone has depreciated more than the euro over this time (leaving aside the Brazilian Real). The interesting thing is that already the ECB is struggling to find bonds to purchase in Germany, because they said that the ...

Angus Campbell

Dollar stronger after nonfarm payroll

The dollar index has hit a new 11.5 year high following a much better than expected nonfarm payroll figure from the US. USDJPY in particular has benefited from this figure hitting 120.90, the highest level of 2015. With the unemployment figure falling to 5.5%, lower than expected and the explosive headline figure of 295k, it's little wonder the dollar and US Treasury yields are spiking higher. However, a look deeper and average earnings disappointed coming in lower than expected which has keep ...

Simon Smith

EUR back above 1.1100 as press conference starts

The EUR initially higher as the ECB press conference gets underway. The technical details of how the ECB is going to start buying government bonds next week. Projections for growth have been revised up, partly on the back of the impact of QE. Given that QE has never been undertaken before in the euro area, its impact is very uncertain.

Simon Smith

EUR making new lows for year

EURUSD made new lows for year (at 1.1081) after BoC keeps rate stead and US non-manuf ISM data slightly firmer than expected, giving USD a lift. There were only residual hopes for a further easing from the Canadian central bank. US dollar reaction suggesting a greater sensitivity to data.

Simon Smith

EUR drifting lower on PMIs

The euro drifting lower once again against the dollar, the latest push lower coming on the back of the latest PMI data in the Eurozone, the final releases for Italy coming in weaker than expected, together with data for Spain. Services data for Germany also weaker than expected at 54.7. EURUSD is now not that far from the post-Greece election low of 1.1098, which remains the key downside support level for the short-term. Nerves are likely to remain in place ahead of the ECB meeting tomorrow, ...

Simon Smith

Waiting on Greece

Dollar yen moving higher this morning, as Greece waits for the Eurozone Finance Minister to offer their judgement on the reform proposals put to them overnight. This reflects on some generalised dollar strength being seen, which has also pushed the Aussie below the 0.7750 level. This is all happening ahead of Yellen's testimony later today, where markets are going to be very sensitive to any change in tone or further indication on the timing of the first rate hike from the Fed.

Simon Smith

Dollar reversal

The minutes of the January FOMC meeting appears to show a committee looking to keep rates lower for longer. This took the market by surprise and put the dollar on the back-foot. This came in the wake of the latest labour market data, which also showed better data for earnings. The other thing that came from the minutes is that the Fed want to be convinced that the pace of activity is sustainable before raising rates. The final factor, less mentioned but cannot be ignored, is the fact that many ...

Simon Smith

UK CPI softer on headline rate

UK inflation falls to 0.3% YoY (from 0.5%), with core rate rising to 1.4% (from 1.3%). The fall in the headline rate was more than expected, Headline fall more than expected, but core rate in line. Sterling little changed. 1.5355. Not surprisingly, it was transport costs (fuel) that was pulling the headline rate lower. Food, together with Alcohol and tobacco were also contributing to the fall, with clothing and footwear offsetting. The fact that the headline rate was higher at the moment ...

Simon Smith

Sterling higher on Inflation Report

Sterling has pushed above 1.53 after the Inflation Report. The press conference has seen this move enhanced, with the Bank of England Governor underlining the view that the drop in headline inflation seen will be temporary, with upward revisions to growth vs. the November report also being seen. EURGBP has also moved below the 0.74 level for the first time since February 2008.

Simon Smith

Euro spiking higher but this is not the end

Having started off on a weaker footing, the single currency has spiked higher on the back of comments coming over the wires regarding the possibility of the EU allowing an extension to the bailout program. The fact that the euro had initially softened reflected the extent of the divide between Greece and Germany, not least because they cannot even agree on what the issue is. For this reason, the scope for a resolution this week looks distant and even though trading the euro on the basis of the ...