Daily Market Commentary

Tuesday, 28 March 2017 - Market Commentary

Senior Private Client Dealer

United States Dollar

Throughout yesterday’s trade the US Dollar was still feeling the effects of Trumps defeat over the healthcare bill raising further questions on his ability to deliver on the rest of his agenda. Next up will be 'tax reform and we can expect this to be even more market sensitive, if he doesnt deliver on this expect to see a huge drop in the currency, a major concern amongst investors at present. Cable briefly flirted with a 4-week high at 1.26 yesterday before retreating to 1.2550 overnight. The Dollar did find some support from FOMC Member Evans, speaking at the Global Interdependence Center in Madrid. His view for this year was 2-3 rate increases a probability but did rule out a rate hike for May, saying he would be surprised if that was to happen. Today sees the release of consumer confidence and the Richmond manufacturing index posting at 3pm UK time.

Sterling was one of the best performing currencies yesterday and was able to chip away at some of its post-referendum losses. With nothing on the docket Sterling was feeding off the bad press surrounding the US Dollar. Whilst we are still way off the levels we were seeing pre-referendum it’s a welcome relief for Sterling sellers. Attention this week will be on the trigger of article 50 on Wednesday, British Prime Minister Theresa May will formally notify the European Union of Britains intention to leave it, launching two years of unprecedented negotiations. Some major banks have predicted the pound will fall below $1.20 in the negotiation period. Britain appears to have set its course for a "hard Brexit", where a clean break is favoured to regain control over issues such as immigration. Theresa May also met with Scottish First minister Nicola Sturgeon yesterday, whilst terms of a Scottish referendum were not discussed Sturgeon is expected to win backing for her plan to pursue a second independence referendum in a parliamentary vote that comes a day before the U.K. triggers two years of talks on withdrawing from the European Union. May said this month that “now is not the time” for a vote and wants to pull out of the EU first. All this uncertainty has added further pressure on Sterling and in a time of uncertainty could prove detrimental.

We expect a range today in the GBP/USD 1.2460 to 1.2600

Euro

The euro extended gains against the broadly weaker U.S. dollar on Monday, rising to five-month peaks after European Central Bank executive board member Sabine Lautenschlager said markets should prepare for a change in policy. EUR/USD touched highs of 1.0903, the most since early November, up 0.88% for the day. Lautenschlager said the markets should get ready for “a change” in ECB policy. The remarks, which came during the ECB’s annual press conference on banking supervision, added to speculation that it could soon slow its quantitative easing stimulus program. There was further support for the single currency after news that German Chancellor Angela Merkels conservatives won a regional election, this helped boost Merkels prospects of winning a fourth term in Septembers national election.

We expect a range today in the GBP/EUR rate 1.1530 to 1.1630

Aussie and Kiwi Dollars

In what has been a very quiet start to the week from a data point of view that hasn’t prevented some big moves, the Aussie was no exception. GBP/AUD has advanced over 3% in the space of a week from 1.5970 to 1.6550. A fall in the Aussie comes off the back of Iron Ore future prices which fell overnight to its lowest level since early February.

Despite the dwindling US dollar sentiment the Kiwi Dollar has failed to capitalise on this loss as a dip in commodity prices and dampening demand for risk capped upward momentum. With little on the docket today attentions remain with wider USD sentiment and we expect a narrow range through much of the session

We expect a range today in the GBP/AUD rate of 1.6370 to 1.6610

We expect a range today in the GBP/NZD rate of 1.7815 to 1.8050

Data Releases

AUD: No data

EUR: No data

GBP: No data

NZD: No data

USD: CB Consumer Confidence, Richmond Manufacturing Index, FOMC Member Kaplan Speaks

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