Markets not as volatile this week but still some surprises in store

In the UK, the Pound appears to be holding its own in the face of political uncertainty, although it remains at the mercy of any Brexit discussions yet to come – and resulting positive or negative currency markets movement. The Spring Statement has also helped some positive sentiment for the Pound.

The UK Chancellor of the Exchequer kept the new Spring Statement fairly short and succinct; focusing on the positives to come out of the UK economy and government change. While markets are talking about these positive aspects of news, it is helping to keep the Pound on a sure footing. The speech on 13th March at 12.30pm was watched closely by markets for insights into the strength of the UK economy and Sterling’s future trajectory.

The UK Chancellor of the Exchequer is likely to keep the new Spring Statement short and sweet; and while markets are talking about the positive news of lower government borrowing, this may help keep the Pound on a sure footing. The speech on 13th March from 12.30pm will be watched closely by markets and insights into the strength of the UK economy and Sterling’s future trajectory.

Eurogroup has a lot to talk about…

The Euro has its own set of troubles. Growth projections for Europe towards the end of last week did little to lift the Euro, which fell on the announcement that the European Central Bank (ECB) was keeping interest rates on hold. Add to this the ongoing political events in Italy, Germany and Greece, not to mention Brexit… and the Eurozone certainly has a lot on its plate. All this and more will be discussed at the Eurogroup members’ meeting.

Strong US employment figures fail to ignite US Dollar 

US employment was the big news at the end of last week, showing the US jobs market to be pretty much at full employment. While this is good news for the US economy and boosted global stock markets, the US Dollar has been weaker recently, and slowed again compared to its major currency partners in light of slower than hoped US wage growth data – in particular the Euro and British Pound – at the start of this week in what appeared to be a lacklustre trading session. However, both the Pound and Euro are vulnerable to Brexit discussions and wider rhetoric around their respective economic futures.

This follows a week of poor performance for the US Dollar, as the resignation of the US Chief Economic Advisor, Gary Cohn, sent shockwaves across the markets and helped all the key currencies to strengthen against a beleaguered USD. Trade tensions between the US and the Rest of the World have not helped, as uncertainties around the US’s trading relationships worldwide remain. Further ripples are now being felt on the news that Trump has sacked his Secretary of State, Rex Tillerson, and replaced him with CIA Director, Mike Pompeo.

Canadian Dollar rises

Positive economic data and US President Trump’s agreement to provide an exemption to Canada from his new aluminium and steel tariffs helped boost the Canadian Dollar after a prolonged time of uncertainty and disappointing data for the North American neighbours. A cautious tone from Canada’s central bank and a decision to maintain the status quo with Canadian interest rates kept the Canadian Dollar under pressure. Markets are pricing in an interest rate increase for the April announcement, as some policy measures will be needed to maintain momentum for inflation; and a sustained period of a weak Canadian Dollar would could support this decision. All this anticipation helped the Pound to rise significantly against its Canadian counterpart, taking it to just short of two-year highs.

Australian Dollar likely to strengthen

The Australian Dollar received a small boost from the latest National Australia Bank (NAB) Business Confidence survey, which was broadly upbeat, although confidence levels have slipped a little. The NAB felt this was consistent with recent monetary policy measures.  Although the Australian Dollar is one of the more consistently strong currencies, it has had its fair share of ups and downs of late. With Australia’s Gross Domestic Product (GDP) data disappointing last week, and knock on effects from commodity prices also affecting the strength of the Australian currency, the AUD is certainly glad of some good news.

At the same time, home loans in Australia, which were expected to show positive results, fell short of forecasts for January 2018; declining for the second month in a row.

New Zealand awaits own GDP data

The New Zealand Dollar is likely to move off the back of the New Zealand GDP results, but is more exposed to external risks in the current economy, such as US data and the trade tariff talk, in addition to commodities prices and data for key trading partners, such as Australia and China. Watch this space…