Market News & Insights
22 May 2017

Fed Speakers May Provide USD Some Lift

he USD closed last week at the weakest levels since Trump was first voted in last November, in fact if we remove the wide range experienced around the time of the vote count, the USD index is at its lowest level since October after it dropped over 2% last week. The Euro was an out-performer throughout the week, the single currency rallying above 1.1200 last Friday before some selling this morning pushed it back lower, while EURGBP has now managed to hold just above .8600 having gaped open there in trade late last night, as sterling has come under some pressure from Brexit related news flow over the weekend. The pound itself has actually been holding firm vs the USD, we did see a break above the 1.3000 level briefly but that quickly ran into sellers and since then GBPUSD has been trying to regain its footing. Broadly risk was back on the front foot into the weekend, in the US stocks rallied higher as the fallout from Trumps back lash faded into the background. It was a similar case in Europe as stocks ended the week rallying higher, while overnight Asian bourses also pressed moderately higher. Trump is far from out of the woods it would seem and he is still a person of interest to the FBI and that continues to see the USD under some pressure this week.

The USD is struggling to find any meaningful traction especially as the governments’ growth policies fall down the pecking order as the administration continues to come to the defense of the President for perceived slights. The first half of the week is relatively light on data but this may provide the USD with the potential for some upside as we are loaded with Fed speakers Monday and Tuesday and leading up to the FOMC minutes on Wednesday. Should we see Fed speakers continue to talk up June as a potentially live meeting then there remains scope for the greenback to pull back some of last week’s lost ground. EURUSD now looks to maintain focus around the 1.1200 area, we have seen corporate sellers active above this level thus far this morning but the trend for now still remains higher. GBPUSD continues to look towards 1.3000 and last week’s highs at 1.3048, while support to the downside between 1.2850/1.2900 area should hold for now.

There is nothing of note from the European session this morning, but tomorrow sees a whole host of Eurozone data. German GDP, Manufacturing and Services PMI data for the Eurozone, as well as the IFO business climate report for German and the Eurozone. Much of the rally in the single currency has come from expectations the ECB will be looking to scale back their current asset purchases, due to end in December. However, given the recent press higher for the Euro, I can’t help feel we may be getting slightly ahead of ourselves. Unless the ECB look to scale purchases before December, then I can only see an expansion of easing beyond into 2018 albeit at a lower level than the current program. It will be interesting to see how markets absorb this news as we progress, as for now it’s all just conjecture and based on some comments from ECB officials suggesting the time is approaching when they well need to begin discussing scaling back easing, that does not mean ending it right away. EURGBP gapped above .8600 late last night at the market open, rallies higher are currently being held at .8625 , should we manage a break above there .8735 area provides real resistance and likely an area where sellers are more interested.