Global Themes

The euro has come under selling pressure this week as economic data continues to disappoint. Investors’ appetite to buy euros is waning amidst the economic slowdown in the Eurozone. As a result, EUR/USD has fallen over a cent this week and has a key support level in its sight.  German industrial orders fell by 1.6% in December, compared to forecasts of a slight gain, which is unnerving investors betting positively on the currency. The 200-week moving average has held as a support level for 15 weeks now, but should the currency pair end below this level this week, there may be an acceleration to the downside, exposing lower levels towards for the currency pair. 

BOE

Although overshadowed by Brexit, the Bank of England (BOE) issued its first monetary policy decision of the year today.  The Monetary Policy Committee unsurprisingly left interest rates at 0.75% with a unanimous 9-0 vote in order to do so.   In the press conference following the interest rate decision, Mark Carney Governor of the Bank of England highlighted the risks ahead for the UK economy as a result of Brexit uncertainty and growing concerns of a global slowdown.  

GBP

Prime Minister Theresa May heads to Brussels today urgently seeking legal assurances regarding the contentious Irish backstop in the current withdrawal agreement. Sterling is falling to fresh 2-week lows against the US Dollar and on track for six straight daily declines.  Ms May is not expected to present any new proposals today and nor is the European Union (EU) expected to reopen the withdrawal agreement. The President of the European Council, Donald Tusk, made an inflammatory comment yesterday about hardline Brexiteers, which certainly heated up the ongoing Brexit debates. No doubt the meetings and developments in Brussels today will overshadow most of the other risk events in the market. Despite the obvious frustrations from both the UK and EU, both sides are striving to avoid a no-deal Brexit scenario.

INR

The Reserve Bank of India (RBI) unexpectedly slashed its benchmark interest rates from 6.5% to 6.25% this morning. The Indian Rupee spiked around half-a-cent higher against the US Dollar on the news. In an attempt to boost economic growth amid cooling inflationary pressures, RBI policymakers switched their stance to neutral as market participants expected, but also surprisingly cut rates by 25 basis points. Although this cut will be welcomed to help with growth, the credibility of the central bank may be at odds and perhaps the Rupee will come under selling pressure in the near future.

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