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Pound Gains on Dollar as Risk Sentiment Sees Safe Haven Demand Fall

 

Last week’s high: $1.2827

Last week’s low: $1.2627

US Dollar Falls throughout Week on Dovish Fed Outlook and Slump in Safe Haven Demand

The GBP/USD exchange rate rose last week as progress in trade talks between the US and China in Beijing saw currency traders increasingly optimistic that a trade deal could be struck between the two nations.

This had the effect of erasing risk sentiment and lowering USD demand across markets.

At the same time, Federal Reserve head Jerome Powell confirmed earlier reports that the US central bank is not aggressively seeking a path of rate rises this year and will instead adopt a ‘patient’ approach to monetary policy based on feedback from the economy.

The Pound failed to capitalise on this Dollar weakness to its full extent, instead being suppressed by political sentiment caused by ministers returning to the Commons to debate Brexit.

Some better-than-expected UK GDP figures on Friday helped lift the Pound towards the end of the week.

 

USD Outlook: Brexit in the Spotlight as MPs Vote on Deal

A range of UK and US date is due to be published this week but this is likely to be overshadowed by political events in the UK as MPs vote on Theresa May’s Brexit deal tomorrow.

If the deal is passed – which is considered unlikely – Theresa May’s ‘soft Brexit’ will proceed, likely bolstering Sterling.

If, however, it fails to pass, all bets are off as to how the Brexit process will continue over the following weeks, although currency markets are likely to take a dim view.

In terms of data, US PPI data is due out tomorrow, followed by retail sales on Wednesday.

For the UK and Sterling, a range of inflation data is due out on Wednesday followed by retail sales figures on Friday.

Key Events

15th January

UK Parliament Vote on Brexit Deal

13:30 US Producer Price Index (Dec)

16th January

09:30 UK Inflation data incl. RPI, CPI & PPI

17th January

13:30 US Jobless Claims (Jan)

18th January

09:30 UK Retail Sales

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

Alastair Archbold

Foreign Exchange Manager

aja@fcgworld.co.uk

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