Global Themes

The quiet data schedule on Monday meant the main currency pairs traded largely within narrow ranges.  The tone within financial markets however was more positive, largely in part to increased investor confidence as North Korea did not conduct further weapons tests over the weekend.  In European trading on Tuesday, the UK’s CPI Inflation data surprised markets and has caused sterling to reach September 2016 highs against the dollar.  There is a sparse data calendar for the remainder of the day which allows markets to prepare for an influx of macro-economic data releases from both the UK and the US from Wednesday onwards. 


The broadly firmer dollar resulting from increased investor sentiment has led to weaker aussie and kiwi currencies.   Hurricane Irma being downgraded to a tropical storm, along with no new geo-political tensions has led to the dollar regaining some of its recent losses against the antipodean currency pairs.   


Throughout Tuesday trading the dollar has managed to gain against the euro as worries from North Korea and the effects from Hurricane Irma have temporarily subsided, thus causing a recovery in investor sentiment.   A raft of top-tier data releases are expected from the US before the end of the week, which market participants will scrutinize heavily.  Friday, especially, will be key to the short-term direction of the dollar with US Retail Sales, Industrial Output, Business Inventories all coming under the microscope.


Last week saw the loonie continue its strengthening streak against the dollar as the continued positive economic data releases from Canada led to further monetary policy tightening with an increase in interest rates for the second time in a three-month period.   With no top-tier economic releases expected from Canada this week, market participants will focus heavily on the US data to provide direction for the currency pair. 


UK CPI Inflation was released earlier today providing a surge to the value of the pound.  The 2.9% CPI Inflation reading vs a 2.8% forecast caused the pound to reach a one year high against the dollar.  With a current inflation target of 2.0% from the Bank of England, the pound rallied to September 2016 levels as there was an increase in speculation for a UK interest rate rise before the end of the year.  The next Monetary Policy meeting from the Bank of England is on Thursday, future direction of the currency pair will be largely driven by the outcome of this.

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