Growth of the British Pound Stalled (Weekly Review)

Despite tight macroeconomic calendar, the past trading week was marked by rather low activity of financial market participants. Under low volatility, the main currency pairs were traded in relatively narrow ranges which they never managed to break out. Paired with the Japanese yen, the US dollar was bought out on decline, and the fact retains the potential of testing and breaking through the level of 110.00. Further growth of stock indices will contribute to this, but if they fall, the USD/JPY will be under pressure.

According to the results of the last week voting in the British Parliament, an amendment was rejected, which would allow to postpone Brexit deadlines, while supporting an amendment that excludes the option of the UK exit from the EU without an agreement. Theresa May received another chance to conclude it with the EU, but Brussels again refused to revise the existing draft agreement. Thus, the British pound failed to overcome resistance in the area of ​​the 32nd figure and continue to rise against the USD and closed the week below the 31st figure, which increases the risks of testing the psychological level of 1.3000.

In full accordance with the forecasts, the US Fed left the interest rate level unchanged, and the tone of the accompanying statement this time was quite “dovish”, and the USD was sold, but on this fall against the euro and the pound it was bought out. Political risks in the Eurozone, along with weak macroeconomic indicators, do not provide sufficient grounds for euro purchases, and strong Nonfarm Report data again suggests the Fed will raise interest rates this year. In turn, there are no reasons for large-scale sales of the euro at this stage, and in the short term, the EURUSD may continue to consolidate in the range.

Schedule for this week: 

Monday, February 4
09:30 GMT – United Kingdom. Construction Purchasing Managers Index (PMI);
10:00 GMT – Eurozone. Producer Price Index (PPI);
15:00 GMT – USA. Factory Orders.

Tuesday, February 5
00:30 GMT - Australia. Trade Balance;
00:30 GMT - Australia. Import/Export;
00:30 GMT - Australia. Retail Sales;
03:30 GMT - Australia. Reserve Bank of Australia (RBA) Interest Rate Decision;
03:30 GMT - Australia. Reserve Bank of Australia (RBA) Rate Statement;
09:00 GMT – Eurozone. Markit Composite Manufacturing Purchasing Managers Index (PMI);
09:00 GMT - Eurozone. Markit Services Purchasing Managers Index (PMI);
09:30 GMT - United Kingdom. Markit Services Purchasing Managers Index (PMI);
10:00 GMT - Eurozone. Retail Sales;
14:45 GMT - USA. Markit Composite Purchasing Managers Index (PMI);
15:00 GMT - USA. ISM Services Purchasing Managers Index (PMI).

Wednesday, February 6
00:00 GMT - PRC. Producer Price Index (PPI);
01:30 GMT - Australia. Reserve Bank of Australia Governor Philip Lowe Speaks;
13:30 GMT - USA. Trade Balance;
13:30 GMT - USA. Nonfarm Productivity;
13:30 GMT - USA. Unit Labor Costs;
13:35 GMT - Canada. Bank of Canada Governor Council Member Lane Speaks;
15:00 GMT - Canada. Ivey Purchasing Managers Index (PMI).

Thursday, February 7
21:00 GMT – New Zealand. Labor Cost Index (QoQ) (Q4);
21:00 GMT – New Zealand. Unemployment Rate (Q4);
21:00 GMT - New Zealand. Employment Change (Q4);
23:30 GMT - Australia. AIG Construction Index;
00:00 GMT - USA. Fed Chair Jerome Powell Speaks;
07:00 GMT - Germany. Industrial Production;
12:00 GMT – United Kingdom.  Bank of England (BOE) Interest Rate Decision;
12:00 GMT - United Kingdom Bank of England (BOE) Meeting Minutes;
12:00 GMT - United Kingdom. Bank of England Inflation Report;
12:15 GMT - Eurozone. European Central Bank Mersch Speaks;
13:30 GMT - USA. Initial Jobless Claims;
20:00 GMT - USA. Consumer Credit.

Friday, February 8
00:30 GMT - Australia. Reserve Bank of Australia Monetary Policy Statement;
07:00 GMT - Germany. Trade Balance;
07:00 GMT - Germany. Import/Export;
13:30 GMT - Canada. Unemployment Rate;
13:30 GMT - Canada. Employment Change.

Author: Anthony Porter, IAFT Analyst