Sterling recovers as Brexit fears subside

Today's Highlights

Sterling recovers as Brexit fears subside

Euro weaker ahead of forecast poor data

USD awaits Federal Reserve

FX Market Overview

It's Anzac Day in Australia and New Zealand, a commemoration of the lives lost during the dreadful Gallipoli campaign in 1915 where allied forces met fierce opposition from the caliphate known as the Ottoman Empire in what is now known as Turkey. It seems so sad that 101 years later, Turkey finds itself on the front line again as ISIL (a group claiming to be a caliphate) tries to fight its way to Europe. As the French so subtly put it, plus ça change, plus c’est la même chose.

In financial markets, all the fighting has been done by the Pound which strengthened throughout last week. The data didn't support a Sterling rally but there appears to be a mood that suggests a vote to exit the EU is less likely today than it was a week ago. President Obama has courted a lot of criticism for his anti-Brexit comments which some saw as scripted by Downing Street. Whether you believe the President or not, the charges of hypocrisy of an American President telling Brits we should be relinquishing control to foreign powers must make you smile. There is a chance his comments will backfire but, for now, the Remain camp appears to be on top.

Sterling strengthened across the board during last week, so we have to wait to see if that will continue with this week's data releases. We will get the latest economic growth data for the UK. The Quarter one data should show a slowdown from Q4. The 0.4% forecast would be a small drop in activity and Sterling ought to weaken if it is so.

The week ahead also brings a raft of data from the Eurozone including unemployment data, various confidence indices, trade balance figures and a slew of individual member state data releases. I suspect the Euro is in for a poor week but, as far as the GBPEUR rate is concerned, that will be a little offset by the pressure on the Pound that would come from a poor GDP release.

The diary is also full of US data and that includes the Federal Reserve's interest rate decision. No change is expected from the Fed but the tone and detail of their statement will be key to the direction of the USD in the days ahead. Everyone is keen to know when they will resume interest rate hikes. I suspect they may be disappointed in the dovishness of the Fed and that would weaken the USD. Be ready if you trade in Dollars.

Another central bank in the news will be the Reserve Bank of New Zealand. There is not likely to be any change to their 2.25% base rate but it is still a very attractive yield for investors who can borrow at virtually 0% elsewhere. Hence the NZ Dollar has strengthened whilst other commodity linked currencies have not.

Across the Tasman Sea, we will get a barrage of Aussie data. Inflation figures should reflect a slowdown, partly due to a stronger Aussie Dollar reducing import costs. We will also get import, export and producer price indices; all of which may explain the consumer inflation numbers. With the Reserve Bank of Australia on hold but on tenterhooks, the Australian Dollar is also likely to be twitchy. Opportunities to catch the highs and lows exist but overnight automated orders may be your best bet if you want to take advantage of that volatility.

And finally well done to everyone who ran in the London Marathon, all 34,000 of you. Well done to the marshals and all the volunteers who made it another amazing event.