Yesterday’s early weakness in sterling, on the back of the latest comments from PM May surrounding Brexit, took cable close to key support levels and the resilience seen through most of the post US election period has been unwound. You can see that better illustrated on EURGBP, where we have seen all of the move down to near the 0.83 level unwound as the cross has pushed above 0.87 to pre-election levels. The conundrum is between the uncertainties created by Brexit, against the fact that sterling has already weakened substantially over the past twelve months, making it look far more attractive from a valuation perspective, especially with cable trading near to levels last seen thirty or more years ago. In this context, it’s perhaps not surprising that we’ve see a divergence between 3M volatilities in cable and EURUSD, with expectations of future volatility in cable rising, the same measure for the euro falling. It’s hard to see calmer see for Cable, especially with this quarter seeing the anticipated triggering of Article 50 and possible parliament ratification of the Brexit decision, should the Supreme Court appeal not go the government’s way.
Overnight, we’ve seen mixed inflation data from China, with headline consumer prices falling to 2.1% (from 2.3%) on annualised measure, whilst PPI (largely commodity prices) rising further to 5.5% (from 3.3% previously). The data is indicative of more prices pressures to come, but for now the yuan has remained relatively stable after the increased volatility seen last week. Attention is turning towards Trump’s scheduled news conference tomorrow and the prospect of getting statements of more than 140 characters, this coming after Obama’s scheduled farewell speech today and the inauguration of Trump next week. As discussed yesterday, it’s pretty clear that we are seeing a stalling of dollar momentum, so the question is whether Trump can put further wind into the sails over the coming week. It could prove to be a hard task. Otherwise, the data calendar is on the light side today.
FxPro UK Limited is authorised and regulated by the Financial Services Authority, registration number 509956. CFDs are leveraged products that incur a high level of risk and it is possible to lose all your capital invested. Please ensure that you understand the risks involved and seek independent advice if necessary.
Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. FxPro does not take into account your personal investment objectives or financial situation. FxPro makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any employee of FxPro, a third party or otherwise. This material has not been prepared in accordance with legal requirements promoting the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and may not reflect the opinions of FxPro. This communication must not be reproduced or further distributed without the prior permission of FxPro. Risk Warning: CFDs, which are leveraged products, incur a high level of risk and can result in the loss of all your invested capital. Therefore, CFDs may not be suitable for all investors. You should not risk more than you are prepared to lose. Before deciding to trade, please ensure you understand the risks involved and take into account your level of experience. Seek independent advice if necessary. FxPro Financial Services Ltd is authorised and regulated by the CySEC (licence no. 078/07) and FxPro UK Limited is authorised and regulated by the Financial Services Authority, Number 509956.
Recommended Content
Editors’ Picks
EUR/USD holds below 1.0750 ahead of key US data
EUR/USD trades in a tight range below 1.0750 in the European session on Friday. The US Dollar struggles to gather strength ahead of key PCE Price Index data, the Fed's preferred gauge of inflation, and helps the pair hold its ground.
USD/JPY stays firm above 156.00 after BoJ Governor Ueda's comments
USD/JPY stays firm above 156.00 after surging above this level on the Bank of Japan's decision to leave the policy settings unchanged. BoJ Governor said weak Yen was not impacting prices but added that they will watch FX developments closely.
Gold price oscillates in a range as the focus remains glued to the US PCE Price Index
Gold price struggles to attract any meaningful buyers amid the emergence of fresh USD buying. Bets that the Fed will keep rates higher for longer amid sticky inflation help revive the USD demand.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
US core PCE inflation set to signal firm price pressures as markets delay Federal Reserve rate cut bets
The core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.3% on a monthly basis in March, matching February’s increase.