The pound suffered huge losses in late Friday trading, compounded by a mix of strong US inflation numbers and more critically the fact that the Bank of England maintains its stance that more Brexit pain is due to come. Adding to that, reports emanated on Friday afternoon that Chancellor Hammond has given up on retaining full access to the single market in the EU, coupled with EU President Donald Tusk indicating to the markets that Prime Minister May has discussed the possibility of triggering Article 50 as soon as February. Though none of the news was extremely alarming or astonishing, sterling fell close to 250 points against the Greenback and GBPUSD is currently trading marginally over the 1.30 level.

With no data out on the economic calendar, focus will remain on further developments on the Brexit issue for the UK, though globally the US interest rate decision later this week will take centre stage.

Greenback finds strength

The greenback continues to find favour among investors at is regains strength across its counterparts. With the crucial Federal Reserve meeting later this week on the interest rate decision, markets will closely follow what the Central Bank has to say. Early expectations of an interest rate hike have been diminishing over the last few weeks, as softer than expected economic data, as well as Fed Member Bairnard’s dovish speech last week have poured cold water on an interest rate hike.

With markets expecting rates to stay on hold and now pricing in for a hike in December 2016, comments out from the Monetary Policy Committee will be closely scrutinised as the US moves away from accommodative policy. With a slight uptick in inflation numbers, Friday’s data also points towards a slightly improving US economy, though we start the week on a fairly quiet note with the NAHB Housing Market Index data to be released today, as EURUSD trades comfortably under the 1.12 level. Current account and net investment numbers out from the Eurozone make for a quiet start to the week ahead of Thursday’s speech by ECB President Mario Draghi in Frankfurt for future Central Bank policy.

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Article by Amir Khan, Corporate Dealer
* Information courtesy of Currencies Direct
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