Trading Remains Flat Again
27 June, 2018
This week we have seen trading to be relatively flat, with market movements led by sentiment due to the lack of data. Rates have been trading within a tight range for a while now, barring a brief spike last week, we haven’t seen major movements on GBPEUR. The biggest mover has been the USD, that has gained over 12 cents since the start of February now against GBP and gaining around 6 cents against the Euro in the same time. Sterling has really struggled to get out of its recent slump, to demonstrate this, last weeks unexpected 6-3 vote in favour of an interest rate hike, struggling to give the Pound any momentum, other than a brief 24 hour period where the markets gained a cent.
However, with the news yesterday morning that MPC member McCafferty, one of the 3 members who voted in favour of a rate hike, stepping down and being replaced by Haskel. Haskel has already suggested he doesn’t favour a rate hike till later this year suggesting the next MPC meeting could see the votes go back to 7-2. Should this be the case then we could see the Pound lose further ground. With the German government now seemingly stable, the potential for the Euro to get stronger is now a real possibility. One of the largest economies in Europe, a stable Germany goes a long way in supporting a stronger Euro, for those of you who are risk averse and want to avoid the rate dropping further, our forward contracts can ensure you lock in a rate and avoid any risk should the markets change.
Sterling’s plight is hindered further with large businesses threatening to quit the UK should we leave with no deal or no transition period. Such threats weakening the UK’s position and bargaining power and putting pressure on Theresa May to leave with a deal that will keep everyone happy. But the question remains; is she the right person to lead us out of the EU? Some Tory MPs still believing that to get the deal the UK wants, Mrs May, may have to leave her position and let someone more capable take the reins. Such uncertainty and divide in the party is sure to put investors off.
Yesterday’s only data, US Consumer Confidence, came in slightly lower than expected, however doing little to change the markets. Today is a slightly busier day, with Carney speaking at 8.30, holding a press conference on the Financial stability report. Investors will be listening with keen interest to anything he says, with any negative news sure to drop Sterling value further. This is followed by USD Core Durable Goods at 12.30, with the forecast of the figure being better than last month. Should this be the case we could see the Greenback gain further on its major pairings.
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