Pound Volatile After Brexit Speech

15 Feb 2018

Published in: The Chamber Patron Group

Please find RationalFX's daily market report for today together with all the economic data/times for today's event(s):

Sterling had earlier traded at a five-week low against the euro before a speech on Brexit by Boris Johnson, Britain's foreign minister and a prominent supporter of the campaign to leave the European Union.

In the first of a series of Brexit speeches by government ministers, Johnson said the benefits of being in the EU's single market and customs union were "nothing like as conspicuous or irrefutable" as their supporters argue.

Investors said Johnson's speech did not deliver any major surprises or bad news, and the pound had recovered its earlier losses after the speech was made. Business leaders said the speech failed to spell out any details on Britain's future relationship with the 27-nation EU, by far its biggest trade partner.

Sterling had strengthened on Tuesday after data showed British inflation unexpectedly stayed near its six-year high in January, firming up investors' bets that the Bank of England will raise interest rates again in May.

U.S. consumer prices rose more than expected in January, with a measure of underlying inflation posting its biggest gain in a year, strengthening expectations the Federal Reserve will have to quicken the pace of interest rate increases this year.

The fairly strong inflation report from the Labour Department on Wednesday put more pressure on U.S. financial markets, which were spooked by a surge in annual wage growth in January.

Prices of U.S. Treasuries fell on the inflation data. The dollar index initially rose against a basket of currencies but later surrendered the gains. Stocks on Wall Street opened lower before erasing losses.

Investors worry that inflation, which is seen as being driven by a tightening labour market and increased government spending, could force the Fed to be more aggressive in raising rates this year than currently anticipated.

The U.S. central bank has forecast three rate hikes for this year, with the first increase expected in March.

Key Announcements

  • 13.30 - USD - PPI MoM; Forecast at 0.4% against previous of -0.1%

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