The Pound and the Euro Are Falling Again (Weekly Review)

The issue of the British exit from the EU and related difficulties that both British and European politicians have tried and are trying to overcome have receded into the background. A significant postponement of Brexit deadline that gives politicians time to find compromises on all controversial issues, could not stimulate interest in buying the British pound, which, after relatively short consolidation around the 32nd figure paired with the USD, was below the psychological level of 1.3000, testing the level of 1.2979. This allows to suggest deterioration of its prospects, while there is no reason for large-scale sales at this stage.

The EUR paired with the USD also remains in a vulnerable position. The German Manufacturing PMI that fell to 44.5 points last week, reminded about the lag of the economy of the Eurozone and its countries from the US economy, pulling the EUR/USD out of sleepiness and provoking its decline to 1.1227. Along with the interest rate differentials and in the absence of demand, the euro will remain the funding currency for speculators involved in the carry-trade, so testing the 12th figure looks inevitable.

Volatility in the foreign exchange market is at record levels over the past few years, against the background of which hedge funds are leaving traditional assets, such as major currency pairs, which only worsens the situation. Meetings of the Bank of Canada and the Bank of Japan will be held this week, but since monetary tightening is not expected from them, there will be no recovery in the market either. Thus, the market activity this week will be low, the same can be said about next week.

Schedule for this week:

Monday, April 22 
12:30 GMT - USA. Chicago Fed National Activity;
14:00 GMT - USA. Existing Home Sales (MoM) (Mar).

Tuesday, April 23
13:00 GMT - USA. House Price Index (MoM) (Feb);
14:00 GMT - USA. New Home Sales (MoM) (Mar).

Wednesday, April 24
00:30 GMT - Australia. Trimmed Mean Consumer Price Index (CPI) (QoQ) (Q1);
01:30 GMT – Australia. Consumer Price Index (CPI) (QoQ) (Q1);
04:30 GMT - Japan. All Industries Activity Index;
08:00 GMT - Germany. IFO Business Expectations;
08:00 GMT - Germany. IFO Business Climate Index;
08:00 GMT - Germany. IFO Current Assessment;
14:00 GMT - Canada. Bank of Canada (BOC) Interest Rate Decision;
14:00 GMT - Canada. Bank of Canada (BOC) Rate Statement;
14:00 GMT - Canada. Bank of Canada Monetary Policy Report;
14:15 GMT - Canada. Bank of Canada (BOC) Press Conference.

Thursday, April 25
23:50 GMT - Japan. Foreign Investments in Japanese Stocks;
02:00 GMT - Japan. Bank of Japan Quarterly Outlook Report (Q1);
02:00 GMT - Japan. Bank of Japan (BOJ) Interest Rate Decision;
02:00 GMT - Japan. Bank of Japan (BOJ) Press Conference and Monetary Policy Statement;
06:00 GMT - Japan. Bank of Japan (BOJ) Press Conference;
06:00 GMT - Germany. Gfk Consumer Confidence (May);
12:30 GMT - USA. Durable Goods Orders;
12:30 GMT - USA. Initial Jobless Claims.

Friday, April 26
22:45 GMT – New Zealand. Trade Balance;
22:45 GMT - New Zealand. Import/Export;
23:30 GMT - Japan. Unemployment Rate;
23:50 GMT - Japan. Tokyo Consumer Price Index (CPI) excluding fresh food (YoY) (Apr);
23:50 GMT - Japan. Retail Sales;
23:50 GMT - Japan. Industrial Production;
12:30 GMT - USA. Personal Consumption Expenditure (PCE) Prices (QoQ) (Q1);
12:30 GMT - USA. GDP Annual (Q1);
12:30 GMT - USA. GDP Price Index (Q1).

Author: Anthony Porter, IAFT Analyst