This morning we are struggling to catch our breath from yesterday’s pound plunge, as the baton is passed over to the US where the Federal Reserve will confirm their rate policy action.
Yesterday brought a lot of movement around the G10 with volatile data and market reactions to the growing chances of Britain crashing out of the EU.
Negative momentum continued to drag the pound to new two year lows, with analysts frantically trying to factor in downside potential.
The SEK gave up 0.7% to the euro, the weakest in over a month, following a shock result for the economy, showing contracting GDP in Q2. The implications of the central bank increasing interest rates at the end of 2019/start of 2020 now yield an element of scepticism.
The previously mentioned outlook from Riksbank regarding the more positive global outlook providing a lack of “insulation” to the economy is starting to show true under the bright lights.
The AUD saw headline inflation beat estimates, moving on most of the majors from this. Conversely, the NZD took the opposite direction with it’s business confidence falling. The volatility will likely continue today, with plenty to keep investors and traders busy.
EUR will likely release inflation data paired with the Gross Domestic Product numbers – both of which are anticipated to fall short. How much of an effect the data will have is yet to be seen, with the European Central Bank stance on the economy pretty clear already.
The key risk event, at 19:00 GMT, will, of course, be the much anticipated Federal Reserve policy decision. With the market all but pricing in a quarter-point cut, the first in 11 years, the narrative around further policy guidance will be under high scrutiny. The expectation for a larger 50 basis point cut is low, regardless of Donald Trump’s desire to go down this path. However, if this transpires then the market is likely to react significantly.
With GBPUSD seeing a 26 month low and over 15% variance in the range, and GBPEUR breaking through 1.09 for the first time since August last year, this really highlights the murky waters in which we tread. If you are looking to avoid market jitters and plan in some certainty to your business exposure, contact your account manager to discuss timing and protection.
Have a great day.