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Trump comments drag dollar down

By Jake Trask

GBP/USD has opened higher this morning as we get nearer to a series of crucial parliamentary votes on Brexit due next week. A softening of language from the pro-Brexit European Research Group of Tory MPs is likely the main reason sterling has opened higher, although there is also some broad based dollar weakness. The group which includes high profile Brexiteer, Jacob Rees-Mogg has issued three tests that it wants PM, Theresa May to pass to win its support. The main sticking point is the Irish Backstop, with the ERG maintaining it wants a time limit to the arrangement regardless of how this is achieved. The parliamentary votes are scheduled for next Tuesday, Wednesday and Thursday with MPs hoping for some sort of breakthrough between the UK and EU this week. Today’s main event from the UK is the monthly Services PMI with the sector expected to show Brexit induced stagnation. GBP/USD is up to around 1.3240

As mentioned earlier broad based dollar weakness is being seen in the markets this morning with comments from President Donald Trump being blamed for the greenbacks dip. In a speech at the Conservative Political Action Conference in Maryland Trump stated that the dollar was too strong and that Fed Chairman, Jerome Powell was someone who “likes raising interest rates.” These comments combined with an article in the Wall Street Journal that stated a US/China trade deal that removes most US tariffs could be signed by the end of March has seen the dollar slip, especially against the commodity currencies. Data-wise this week’s big event will be Friday’s jobs report from the States with Non-Farm Payrolls expected to show a 185k gain and monthly hourly earnings expected to rise by 0.3%. EUR/USD sits around the 1.1350 handle. USD/JPY is at 111.92.

Thursday sees the latest interest rate decision from the European Central Bank with no change in policy all but guaranteed from bank chief, Mario Draghi. The main area of interest will be comments from the Draghi over the recent slowdown in output from the bloc with recent figures showing Germany narrowly avoided a recession at the end of last year. Although a resumption of QE is unlikely from the bank, there is a feeling we may see a reintroduction of its targeted longer-term refinancing operation with cheap loans available to the EZs lenders. Ahead of the ECB there is little data to digest so the usual ongoing issues of Brexit and US/China trade will likely affect the single currency the most. GBP/EUR is up to 1.1670.

With Trump taking a swipe at the Fed and a strong dollar and reports of a trade deal between the US and China getting closer the Aussie started this morning’s Asian session higher, with AUD/USD breaking through .71 before retracing on the back of some softer than expected domestic data. Quarterly Company Operating Profits undershot by some distance showing 0.8% growth far lower than the 3.1% predicted. It’s a busy docket this week from Australia with tonight seeing the latest interest rate decision from the Reserve Bank of Australia. Tomorrow night is the latest GDP reading with Retail Sales numbers due Wednesday night. GBP/AUD trades at 1.87.

The loonie ended last week on the back foot as monthly GDP data missed estimates showing a second consecutive fall of -0.1%. This week’s main event is the interest rate decision from the Bank of Canada due on Wednesday. A hold at 1.75% is expected with global trade headwinds likely to mean the door is left open to a rate cut at some point in the future. USD/CAD is at 1.33 with GBP/CAD at 1.76.

The kiwi popped higher this morning mirroring the aussies rise however the soft company profit data from across the Tasman Sea dragged down NZD erasing virtually all of the gains seen during the Asian session. There is little of note happening all week from NZ so US/China trade will likely dictate the local dollar’s value. GBP/NZD is at 1.9450.