Good morning,
Data isn’t a key driver today, with no significant releases to finish the week off.
Out of the US, a dovish tone was emitted from key FOMC board members yesterday regarding the call to action for the US interest rate cuts, and the necessity to get ahead of potential flagging economic data.
The market has reacted by pricing in the likelihood of a 50 basis point cut more, with the scales still tipped towards the lower 25bps at 60% probability and 50bps at 40% according to Danske Bank. A lower USD yesterday heads into the month-end with a caveated anticipation of weakness on the horizon and Steven Mnuchin’s remarks of no change in the nation’s currency policy “as of now” increasing the idea of the US weakening the dollar.
The pound enjoyed a modest gain yesterday with Barnier kicking off the day with positive remarks around the Irish Border arrangements. Better than expected retail sales also picked up the momentum and took it for a run.
Elsewhere, the Japanese Yen declined against most majors following a strong month, as the haven currency found less reason for worried investors to buy. This was due to a combination of a stronger equity market in Japan and an easing from the US/China trade negotiations.
The Chinese Yuan demand in the corporate space is also weakening as businesses are showing a preference towards the dollar – thought to be aligned with trade tension alleviation.
Next week we walk further into the unknown. The global picture gets murkier, with an ever-increasing possibility of a no-deal Brexit, Central bank dovishness around the globe, and the trade dispute with the US & China still dragging on.
Speak to one of our Account managers on 0207 326 9120 if you need to discuss short term forecasts and scenario planning for your FX.
Have a great weekend.