Find Out Biggest Risk For This Week's Forex Markets
On the Forex front, the euro moved lower as the ECB provided signal that it could ease policy further sooner rather than later. EUR/GBP finished the week below 76p, while EUR/USD traded near $1.08. At the same time, GBP/USD traded back up around $1.43, having been as low as $1.408 early in the week.
This week, monetary policy could remain a key driver of Forex markets. The Federal Reserve meets in the US, while no changes are expected it will garner plenty of attention. Dollar watchers will be looking for any signs that the recent market turmoil has seen the Federal Reserve adopt a more cautious stance. Markets are pricing in just one 25bps rate hike this year, versus the Fed’s December projection for four.
For the euro, HICP inflation is forecast to remain very weak in January (+0.4%). ECB President Draghi delivers a policy speech today. Both events could serve to keep the single currency on the back foot. Sterling-wise, UK Q4 GDP is the key release. Growth is forecast to improve, while remaining moderate. However, such a result could still provide some support to sterling.
Both sides of Brexit vote debate past results
This past week has seen the No vote suggest that the benefits of EU membership have not helped the British economy since 1992. The no vote points out that exports were 22% lower since joining the single market. This statement came from a report by Civitas, which also outlines that after trade actually dropped after European commission trade deals.
While these maybe valid points, it demonstrates that both sides are pointing out extremely biased views about EU membership. One thing that must be remembered is that over the past 24 years, the UK economy has heavily transitioned to a services economy.
The Yes vote for continued EU membership is worried that if the UK was to leave the EU, then it would as a result lose access to the single market as a natural consequence. The Yes vote has pointed out that about 50% of UK exports are EU based. Read more about this UK EU membership debate on the BBC
Australian Business confidence
Australian business confidence for December fell to 3 from 5 in November. However this survey was collected on the 15th January which usually does not happen. As a result, the index has shown resilience considering the financial market problems of the first 15 days of the New Year.
The Business Conditions index fell to +7 from +10 which is well above the average of +5.
Commodity currencies back under pressure
As the end of last week, both the Australian, Canadian and New Zealand Dollar experienced a rise. This was due to Mario Draghi mentioning further support and China pumping 400 billion yuan into the financial system.
Today the CAD/USD trade at $0.705, AUD/USD $0.6993 and NZD/USD $0.6492.
TransferMate’s receivables service:
We have launched a new receivables service which allows business to collect funds due at better exchange rates while cutting out the cost associated with using a bank. We are very proud to have launched this service and have invested €15 million into the business to accelerate our future growth plan. Find out more about the receivables service today or contact our team to find out how you can start using our service today