Sterling Strengthened In Last 24 Hours
The action on currency markets yesterday was range bound within recent levels. Of the moves that did register, sterling has strengthened somewhat over the last 24 hours. The firmer tone sees GBP/USD trading back above the $1.43 level, while EUR/GBP has fallen, with the pair changing hands below 76p. Meantime, EUR/USD remains in the $1.08-1.09 band. Elsewhere, the stabilisation in oil prices has provided support to ‘commodity’ currencies such as the Canadian and Australian dollars.
Today, the focus for markets will be the conclusion this evening (after close in Europe) to the Federal Reserve (Fed) January policy meeting. While no policy changes are expected, the meeting statement will still receive plenty of attention/analysis. This is in light of recent market turmoil, including the further weakness in oil prices and concerns of the risks from Emerging Markets to the global economic outlook.
However, current futures pricing suggest the market is expecting just one rate hike in 2016. From a dollar perspective, the FOMC meeting provides some two way risk. If the Fed appears to be now less hawkish, then this could bring some downward pressure to bear on the currency. However, if the Fed appears to be looking through recent market volatility and macro concerns, then the dollar could receive some renewed upward momentum.
Foreign Secretary Phillip Hammond Believes That UK Exit Would Take Years
Yesterday Mr Hammond addressed the UK government stating, “we would expect there to be a period of certainly years during which these discussions would take place and any arrangements that needed to be made could be put in place.” Purely because there is no precedent to follow and the government has no contingency plan if the public reject David Cameron’s proposal.
Italian Business Confidence Under Pressure
During 2015, the Italian economy grew for the first three quarters but at a much slower pace each quarter. As a result, Italian businesses have become pessimistic about the potential for economic growth this year.
Manufacturing sentiment declined for January to 103.8 in Italy. Additionally industrial output disappointed as the 0.5% rise in October was wiped out in November. Recently reports on consumer confidence found that Italian household’s morale improved to 118.9 from 117.7in December.
Australian Dollar jumps
Since the start of 2016, the Australian Dollar has been bounced around within a range of $0.68 to $0.71. This two to three cent divergence is due to oil price fluctuations and tumbles on the Chinese stock market.
The annual rate of inflation from December came in at 1.7%. This is just below the central bank’s target of between 2 and 3 percent. If you have been wondering whether the Australian central bank would raise interest rates, currently the market has the likelihood at 40% (from 64% in December) for a rate cut in March.
Glenn Steven’s who is Governor of RBA, is unlikely to be moved by the global economies fluctuations and developments throughout the past month. Instead, economists and analyst believe that he will focus on the core credentials for the Australian economy which are currently strong employment figures (unemployment is at 5.8%) and a boost in consumer spending thus inflation because of falling oil prices. You can read more here
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