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European Central Bank Surprises Markets by Avoiding Dovish Tone

Pound News: More Pound Weakness Ahead if No-Deal Brexit Becomes More Likely

The Pound saw mixed movement yesterday and was driven largely by fluctuations in the movements of rivals. This came as the latest UK news did little to offset the broad uncertainties in the UK and Pound outlooks.

While economists believe that a no-deal Brexit is still a fairly unlikely outcome, a new poll showed that many expect the Pound will be in for further losses in the event that a no-deal outcome becomes reality.

No notable UK data will be published today, leaving Pound investors once again focused on potential developments in politics and Brexit. In particular, the Conservative Party leadership contest is likely to see further developments.

 

Euro News: Surprise Lack of Dovishness in European Central Bank Leads to EUR Gains

Following mixed performance on weak Eurozone inflation data earlier in the week, market demand for the Euro rose yesterday following the European Central Bank’s (ECB) latest policy decision and press conference.

ECB President Mario Draghi surprised investors by eschewing his usual dovish tone and raising his 2019 inflation expectations to 1.3% rather than the previously forecast 1.2%. The bank also indicated that monetary policy would remain frozen until mid-2020 at the earliest however.

After yesterday’s boost, Euro investors will be looking for further signs of strength in the Eurozone economy so today’s German trade and industrial production stats could prove influential.

 

US Dollar News: Fed Rate Cut Bets and Euro Strength Lead to US Dollar Losses

The US Dollar saw a brief rebound in the middle of the week as investors bought the currency back from its lows thanks to some stronger-than-expected non-manufacturing PMI data from ISM.

However, the US Dollar ultimately weakened again yesterday as investors bought its rival, the Euro. On top of this, weaker-than-expected productivity and labour cost data weighed on the US Dollar in the afternoon.

Still, investors have been hesitant to make any significant moves ahead of today’s upcoming US Non-Farm Payroll report, which has the potential to influence Fed interest rate cut bets if it surprises investors.

 

Canadian Dollar News: Strong Exports Data Helps CAD Remain Firm

Despite this week’s slightly stronger Pound and global trade fears weighing heavily on the appeal of trade-correlated currencies, the Canadian Dollar has been able to hold some gains against the Pound for most of the week.

Yesterday’s Canadian trade balance stats showed a surprise jump in exports, lightening the nation’s trade deficit to C$-0.97b. This news bolstered Canadian Dollar support and made investors feel more optimistic about Canada’s trade resilience.

Canadian Dollar investors are still anticipating today’s job market report though. If the job data falls short of expectations, investors may become more concerned about the health of Canada’s economy and CAD would weaken.

 

Australian Dollar News: Bearish Australian News Limits AUD Strength This Week

While weakness in the US Dollar has bolstered the Australian Dollar and some investors have been buying the currency back from its lowest levels, the currency’s gains versus a weak Pound have ultimately been limited.

The Reserve Bank of Australia (RBA) cut interest rates near the beginning of the week and the growth data published on Wednesday fell short of expectations. This has weighed on the Australian Dollar’s potential gains.

AUD investors may react to construction and home loans data, or US trade developments, before markets close for the week.

 

Upcoming Data

 

Friday, 7th June

02:30    Australian Home Loans

07:00    German Industrial Production

07:00    German Trade Balance

13:30    Canadian Job Market Report

13:30    US Non-Farm Payroll Report

15:00    US Wholesale Inventories

 

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To keep up to date with the Euro, visit the Euro blog in our Currency News section.

 

Michael Vaughan

Senior Currency Broker

mgv@fcgworld.co.uk

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