Market News & Insights
13 January 2017

Sell On May: The GBP Mantra

The USD attempted to stage a recovery through yesterday, after the weighted index for the greenback traded to almost 1 month lows following Trumps’ speech on Wednesday which delivered little in terms of information on Fiscal plans and thus raised some questions about the President elect’s policy. The dollar failed to advance however, simply covering some of its losses before it appeared, and sellers once again took control overnight and this morning. GBP was performing firmly through much of the day, holding near 2.3% above the weeks lows against USD before details emerged that PM May would be speaking to outline the plans for Brexit next week, with a big announcement due, GBP immediately dropped almost 1% against the USD, while EURGBP was up over 1% on the day following the pound’s quick sell off. Once again sentiment around Brexit is proving to be a stronger driver than anything fundamental for the UK.

Both the Euro and JPY were outperformers for much of yesterday until the European close, there appeared to be safe haven demand, as European stocks stuttered to losses while in the US equities had one of their worst openings since October. All major US bourses closed in the red but overnight we saw some positivity with the Nikkei up .8%, which also managed to take some of the shine off JPY.

Jobless claims in the US were marginally better than expected and gave the dollar a slight lift but it was more hawkish commentary from Fed officials that lifted the greenback off its lows. Now the rhetoric certainly wasn’t all hawkish, hence the USD failed to post gains on the day and there was some caution but the team of Fed speakers passing out rhetoric regarding normalization/trimming of the balance sheet etc but one of the biggest disagreements within the FOMC appears to be how quickly they should be raising rates. The USD has been back facing selling this morning but focus today will be on data for the first time this week, as well as several Fed speakers. PPI inflation data, Retail sales for December and the U of Michigan confidence survey all cross the wires, all are set for small improvements and if that happens the USD may get a lifeline into the end of the week. EURUSD rallied towards 1.0680 area before running out of momentum, although 1.0600 appears to be holding firm for now. GBPUSD ran into selling above 1.2300, with support back below towards 1.2080 area once more.

There is very little to attract attention this morning but yesterday’s announcement from the UK, that PM May will speak on Tuesday to set out her plan for Britain to leave the EU, resulted in a quick sell off in GBP. GBPUSD failed to hold progression above 1.2300, but also this week failed to hold those lows sub 1.2100, so for now GBPUSD remains directionless, stuck in the middle that range for now. EURGBP once again traded towards .8750 but found sellers emerge, we‘ve seen EURGBP struggle to break above here on a number of occasions since July, so should we see a break out to the topside we’d expect to see movement towards .9000 before real sellers emerge once more.