Global Themes

  • The calm before BOE frenzy
  • March transition deal could be in doubt
  • US stocks rebound causing more volatility


The calm before BOE frenzy

Sterling suffered another day of losses against the US Dollar yesterday. GBP/USD has fallen for a 3rd consecutive day, now down over 2% since last Friday which is its worst 3-day performance since June 2017. Yesterday saw the pair trade as low as $1.3844 but bounced during the US open to finish the day over 100 pips higher at $1.3947.

Against the Euro, Sterling continued to fall but at a slower pace than GBP/USD. GBP/EUR halted its descent after falling to €1.1220, rejecting this level and making a run back towards €1.13. This morning both GBP/USD and GBP/EUR hover below the $1.40 and €1.13 handles respectively as market participants take a breather ahead of tomorrow’s highly anticipated ‘Super Thursday’.

  • Tomorrow will see the release of the Bank of England’s (BOE) quarterly inflation report and its interest rate decision, followed by a press conference led by BOE Governor Mark Carney. The flurry of data and forecasts will keep traders and market participants busy throughout most of the day, and speculative trades may begin to hit the markets prior to announcements.
March transition deal could be in doubt

Brexit talks continue to offer fresh complications each day for the UK and Sterling as a mix of different stories point to potential delays. The hope was (and still is) that the details for a transition period should be finalised by next month. However, a draft document from the EU bloc hints that the UK may have to pay more into the EU budget than what the UK had outlined, and the UK would have to abide by new EU regulations during the transition period or face suspension from the single market.

This could prove very problematic for UK Prime Minister Theresa May who is already under heavy pressure from MP’s in her own party who support a hard Brexit (source: Bloomberg).

  •  The split between business and the government’s position on Brexit also came back into focus again yesterday as the British Chambers of Commerce released a statement warning that “patience is wearing thin” with the lack of clarity and indecision over the position of the negotiations (source: Guardian). It will continue to be difficult for the pound to lift back to the high’s against the USD and EUR we saw in January unless some news of progress is made.


US stocks rebound causing more volatility 

After the sharp sell-off we saw in US stocks on Monday, equities rebounded yesterday to post their biggest one-day rally in 15 months with traders encouraging calls to “buy the dip” (source: Bloomberg). This stock market volatility, which is impacting currencies also, was triggered by growing concerns that the US Federal Reserve may have to raise interest rates more sharply this year.

In addition to this theme, the temporary extension to the US state spending expires on Thursday night which could see another government shutdown like we saw in January. Temporary extensions seem to be the only way forward at the moment with Republicans and Democrats a fair way apart on agreeing anything for the long term.

  •  The continued market volatility caused by stock markets has led to safety demand. The haven Yen strengthened against the dollar by over 1% yesterday from ¥108.45 to a high of ¥109.63. However, the Yen lost ground against Sterling, dropping back into the ¥152 level in the overnight session. However this morning the Yen has again had another rally against the pound and moved back to the ¥151 level as confusing two-way volatility continues.

*The rates displayed by our free currency converter are neither "buy" nor "sell" rates, but interbank rates, the wholesale exchange rates between banks. Interbank rates don’t include the spreads, handling fees, and other charges that may be assessed by foreign exchange providers. Please note that, as such, these rates are provided for indicative purposes only. Prior to booking a transaction, Western Union Business Solutions will advise you of the actual rate then available for a particular currency transaction.

Deliver the Daily Currency Market Analysis to my Inbox

Published five days a week, this newsletter provides day-to-day trends and activities affecting the market in easy-to-understand snapshots.