13th February 2018 -UK currency unable to gain support from higher yields and an improvement in risk conditions

 

     

UK currency unable to gain support from higher yields and an improvement in risk conditions

Global equity markets continued to recover ground following Wall Street’s late recovery on Friday which underpinned risk conditions, although sentiment turned more cautious later in Tuesday’s Asian session as uncertainty persisted.

The dollar lost ground as defensive support faded with the currency index declining below 90.0 amid speculation that a medium-term downtrend would resume if yield spreads narrow and funds are attracted away from US markets.

A weaker dollar and improvement in risk appetite provided net support to energy markets and commodity currencies as gold prices held firm, although Sterling was unable to make significant headway.

External Bank of England Monetary Policy Committee (MPC) member Vlieghe stated that there was increasing evidence that the tight labour market was putting upward pressure on wages. Although the bank was tightening policy through macro-prudential measures, it was also appropriate to raise interest rates, especially given strength in the global economy, although there was also a high degree of uncertainty.

There was little impact on interest rate futures following the comments with the chances of a May rate increase seen at around 60%. Sterling gains faded quickly as Vlieghe also emphasised uncertainty.

Fellow MPC member McCafferty stated that interest rates were likely to increase at a slightly faster pace than expected late in 2017, although there were no major hawkish comments.

The UK currency was unable to gain support from higher yields and an improvement in risk conditions. There was a negative impact from underlying political concerns while caution ahead of Tuesday’s inflation data was also a feature.

 

Overall, GBP/EUR weakened to the 1.1220 area while GBP/USD found support close to 1.3800 and rallied to the 1.3850 area as the US currency came under pressure.

     
 
       
 

GBP/EUR 

– 1.1248

 
 

GBP/USD

– 1.3854

 
 

GBP/CHF 

– 1.2944

 
 

GBP/JPY 

– 149.33

 
 

GBP/AUD 

– 1.7619

 
 

GBP/NZD 

– 1.9014

 
 

GBP/CAD

– 1.7425

 
 

GBP/ZAR 

– 16.5270

 
 

GBP/NOK 

– 10.9240

 
 

GBP/SEK 

– 11.1601

 
 

EUR/USD 

– 1.2317

 
       
  All rates are indicative of interbank rates*  
       
 
 

GBP/EUR

 
 

GBP/USD 

 
 

EUR/USD 

 
       
 
   

09:30 GBP

UK CPI (M/M)

0.40%

0.40%

 
   

09:30 GBP

UK CPI (Y/Y)

3.00%

3.00%

 
   

13:00 USD

FOMC Member Mester Speaks

-

-

 
   

23:50 JPY

Japan GDP Annualized

1.30%

2.50%

 
 
   
 
 
*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time.  CentralFX are not responsible for the rates shown.
 
 
 

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