Weekly Market Report 08/01/2018

GBP

GBP/EUR and GBP/USD had a relatively flat trading week last week to kick off 2018. Not much political news or Data releases happened last week as GBP/EUR traded within the 1.12 mark and GBP/USD traded between the high 1.34s and low 1.36s. Looking ahead this week Sterling movement will largely be dictated by news coming out of the US and the Eurozone, but Industrial and Manufacturing production data released on Wednesday will be a good indicator in which way the economy is moving.

EUR

In a busy data week for the Eurozone, culminating in a ECB monetary policy meeting, the single market will look to carry on going from strength to strength to kick off the year. With strong data expected to be released throughout the week, it could be a strong week for the EUR. If you are currently holding any EURs now could be a good time to take advantage.

News of a coalition in Germany and news surrounding Brexit will largely dictate the EUR in the coming weeks and months however, so markets will be on the lookout for any breakthroughs in both situations.

USD

USD is currently sitting at a 2 year low against the EUR (1.207) and an 18-month low against GBP (1.355). Trump’s tax reform and consistent tweeting seems to of done little to help strengthen the US dollar albeit we have seen record highs in US markets.

Analysts are predicting 3 interest rate hikes during 2018 which could boost US dollar through the year. The US central bank declared their interest in raising interest rate hikes this year at the last meeting, stating ‘The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run’.

These hikes will largely dictate the price of the Dollar this year against major currencies as the US look to raise interest rates more aggressively then anyone else, especially if markets conclude that the FED are moving faster then the economy which would certainly see the US dollar weaken further.

Data releases week ahead:

Tuesday: EUR non-monetary policy’s ECB meeting
Thursday: EUR ECB Monetary policy meeting accounts
Friday: USD Retail Sales (MoM) Dec
USD Consumer price index Ex food and energy (YoY) Dec
USD consumer price index (YoY) (Dec)

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