With markets back in full-flow yesterday it was the US dollar which bared the brunt of selling across the foreign-exchange space.
The greenback is weaker for a few reasons but one of the main factors is the deterioration in the economy. Last week’s inflation and retail sales data did nothing to help the buck’s cause and has ultimately assisted it in losing value against its major peers. The meeting minutes from the Federal Reserve’s last gathering in January are set for release tonight. The Fed decided to take a U-turn in policy at this announcement compared to their stance at December’s meeting. I wonder if the 10% drop in the stock market and the continual Fed bashing from Donald Trump had anything to do with it?! Nevertheless, as a result of the shift towards a more dovish stance, it’s likely these minutes reflect that message and could be another valid reason for the greenback weakness.
The pound was one of the main beneficiaries of yesterday’s dollar weakness. The GBPUSD pair managed to climb above the $1.30 resistance level and up toward the $1.3080 mark. Even though the euro benefited from the buck’s hardship, it did so at a slower pace to the pound, the result being a nice move for GBPEUR above the €1.15 price. These moves come ahead of a meeting between Theresa May and Jean Claude Juncker in Brussels. Many investors are still hoping one of these meetings may finally provide a breakthrough, however, for the moment Juncker is towing the line and standing firm that the EU will not reopen the withdrawal agreement. Will today’s meeting bring the pound to its senses and push it lower?
Written by Viv Savani. 8:57am, February 20th 2019
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