Article 50 Dutch elections and FED rate decision

15 March, 2017

Rob Bastin

In a speech to the House of Commons yesterday Theresa May reiterated her intentions to invoke Article 50 before the end of March having passed the necessary bill on Monday evening. The Prime Minister has however opted to delay this action until later in the month, most likely in around two weeks’ time. The currency markets are somewhat split on their opinions for what effect this will have on Sterling, with some banks and analysts stating that the recent drop has already priced in Article 50 but others arguing that further downside movement should be expected. Data wise yesterday the Euro-zone produced better than expected sentiment figures as the economic recovery continues to strengthen, and US Producer Price Index figured also surpassed all forecasts. Sterling was, therefore, the primary loser yesterday as Brexit concerns continue to dominate the headlines.

In the Dutch elections, Geert Wilders will today take on Mark Rutte as up to 13 million people get ready to vote throughout the day. The two front runners are considered neck and neck in the latest polls and the Euro is sure to be affected overnight once the counting begins after 8 pm. Simplistic expectations are that if Geert Wilders wins then the Euro could weaken massively given his intentions to pull Holland out of the EU; subsequently, a win for Mark Rutte would be seen as Euro positive.

Across the pond tonight the Federal Reserve also meet to announce their latest rate decision, with the markets having already priced in as much as a 100% expectation of a 0.25 basis point increase. The markets will, however, be eagerly awaiting the accompanying statement for indications on the future pace of further rate hikes with markets now forecasting as many as four increases this year. Any variation in this or indeed the size of the rate hike itself is likely to cause volatility in the Dollar, Euro and even Sterling.

Before we get to tonight’s crucial events, the morning session will be dominated by UK data with the unemployment rate and average earnings announced at 9:30 am. This afternoon we also have US Retail Sales and Inflation figures at 1:30 pm meaning the next 24hrs is one of the biggest seen in the currency markets in months, and volatility levels are likely to increase significantly, therefore, increasing your risk. To discuss the potential implications of your currency purchase, contact your broker today on 0800 043 2623.