Markets remained attentive to political risks

Ebury Forex Market Analysis

Ebury: "Any indication that supports a rate hike in March could provide a boost to the dollar."
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main currencies fluctuated in narrow ranges last week, omitting positive economic data in United States. The currency markets They seem to be discounting the political risk that looms in the economies of both sides of the Ocean.

 

Concerns about the upcoming European elections, and their possible impact on the euro, were offset last week by worries surrounding the administration. Trump and its strange and confusing communication policy. The result was a dollar trend that could not benefit from the semi-annual speech that Yellen led Congress, which was characterized by an optimistic tone, or the upward surprise in the level of inflation in the United States in January. Thus, the dollar ended the week practically unchanged against all currencies of the G-10, except against the pound, which was hit by suggestions that the European Union could take a difficult attitude to negotiate the process of Brexit.

 

Main currencies in details

 

EUR

 

The minutes of the ECB They continue to point out that monetary policy will remain on the same line as until now. Their position is justified by the recent rise in inflation driven by energy prices and the slight reduction in risks that have characterized the Eurozone in recent months. We find it difficult to imagine any sustained rebound in the euro until there is a significant change in the outlook for the euro. ECB, something we don't think will happen anytime soon.

 

This week we will be paying attention to one of the most important indicators, the PMI business sentiment index. The consensus expects the SMEs compound remains unchanged, which would not have a major impact on the euro and the latter would be quoted mainly in relation to news regarding the French and Dutch elections.

 

 

 

Ebury, the financial institution specializing in foreign exchange, highlights the market's interest in the publication this week of the minutes of the last Federal Reserve meeting.

 

 

GBP

 

Last week was a difficult one for the pound. The flow of economic data didn't help, as we saw two indicators decline: CPI inflation and retail sales. In fact, we could say that the pound performed relatively comfortably against this very negative backdrop.

 

Fourth-quarter GDP growth will be released this Wednesday. Although it's a lagging indicator, a positive surprise should support the pound.

 

USD

 

Yellen's positively-toned speech to Congress last week was followed by the release of some positive indicators, such as inflation, which is particularly important in providing evidence and support for the "reactivation of trade."

 

The minutes of the last meeting of the Federal Reserve, being one of the main events for the markets this week. In our view, any hint of support for a rate hike in March (currently priced in at a 40% chance) could provide upward momentum for the dollar to break out of its recent trading range.

 

Source: Ebury