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Forex: Mixed fortunes for FX

The weaker tone to the euro gained earlier has seen some reversal after the weaker than expected retail sales data in the US, but take note of the revisions to the previous month, which make the headline miss (0.1% vs. expected 0.4%) a little easier to digest. The other point of note is the Aussie, which has reversed the earlier weakness after the budget, pushing towards the 0.94 level.  Overall, FX volatility has been picking up from the lows seen at the start of the month and this could well continue tomorrow with the release of the UK Inflation Report.  There has been growing speculation that we are likely to see the Bank shift its stance as the notion that rates can remain on hold well into next year.  The question is to what degree this is already priced in by the currency, with rate expectations (for middle of next year) around the highest for the year, with 3M money seen at 1.5%, vs. 1.3% a month ago.

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