Currency markets have been mostly steady on Thursday, with the US generally underpinned, although Sterling had a wild ride following the BOE meeting. Cable initially headed sharply lower after the BoE left rates on hold but downgraded economic forecasts due to uncertainty about Brexit. It then bounced back, equally sharply, after Mark Carney indicated that markets should not prepare for a rate cut despite the weaker outlook. Also underpinning Sterling are the growing hopes that the UK will make some progress in coming days in negotiations on its departure from the EU, although the soundbites coming from the EU suggest that there is no room for manoeuvre. For its part, the US$ does look underpinned and the DXY charts look firm although note that US yields are sharply lower today, so I don’t think the dollar is going to run away to the topside (US10Y; 2.65%).
Elsewhere, data was thin although the EU slashed growth its outlook, with 2019 growth forecast to be 1.3% down from the prior forecast of 1.9%, while noting that there is “a high level of uncertainty” surrounding the outlook – and the projections are subject to downside risks. Not really a positive tone for the Euro.
Elsewhere stocks moved sharply lower after an announcement that Donald Trump will not meet with the Chinese premier, Xi, before the tariff deadline, but may meet afterwards. This has rekindled U.S.-China trade fears and has caused the US indices to fall by 1.0% -1.5% and has taken oil with it, with WTI down by 2.8%.
Friday will wrap up with the RBA Statement of Monetary Policy, which could well continue to exert downside pressure on the currency. Later on from Europe we get, the German Trade Balance and Current Account, while the US will be thin with just the Michigan Consumer Sentiment Index to provide guidance.
Economic data highlights will include:
Fri: Japan Trade Balance, Current Account, Eco Watchers Survey, Australian RBA SOMP, German Trade Balance, Current Account , UK GDP, Michigan Consumer Sentiment Index , Baker Hughes Oil Rig Count
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