FX market lacking direction - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, explains that it is hard to find clear direction in FX markets, although we are seeing some swinging moves. 

Key Quotes

“The USD appeared to weaken broadly as the healthcare bill failed last week, but bounced back this week.  The EUR poked its head above 1.09 on Monday, a high since November last year, but has slid back to the mid-1.07s.”

“The fall seems at odds with the solid polling by Macron in the French election and strong PMI and IFO data on Friday and Monday.”

“There was a report today in Reuters citing unnamed ECB members, saying they were surprised that the market had projected rate hikes might occur early next year, and thought it had over-interpreted the 9 March ECB policy meeting.  They said there was unlikely to be any further change in the ECB policy guidance in April, and the March meeting was meant to convey only less tail risk, not a step towards exit from the ultra-easily policy.  This probably helped knock back the EUR, but sounds like standard jawboning by doves to prevent a rapid up-move in EUR.  The market is likely to keep speculating about QE tapering and/or higher rates in 2018.”

“The UK triggered article 50 to begin the Brexit process, and the Scottish parliament voted to press ahead with its call for a referendum to exit the UK.  This news may have undermined the GBP modestly.  The news is not a surprise, but underlines the long and uncertain process that may keep GBP cycling around a wide and directionless range for the foreseeable future.”

“We described anxiety in Australia over housing, electricity, Government budget and Chinese steel demand as undermining the AUD early in the week.  However, it has bounced back in recent days on firmer commodity prices and stable US and global equities.  Australian equities also rose strongly.”

“The market is grappling with ongoing high levels of uncertainty related to Brexit and increased uncertainty over US economic policy direction.  Equity markets have built in a relatively optimistic scenario for global growth.  Global economic indicators have increased supporting emerging market currencies.”

“US bond yields remain lower this week, perhaps reflecting more doubts over the scope for effective policy reform in the USA, prevent a more positive response in USD.”

“Chinese corporate bond yields have been largely steady this week, but have been creeping higher, suggesting some tightening in Chinese monetary conditions.”