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Super Thursday, Super Volatile?

Super Thursday, Super Volatile?

GBP 
Sterling is trading quite flat at around 1.3880 against the US Dollar before the Bank of England (BOE) is deciding on interest rates and publishes its quarterly Inflation Report presenting macroeconomic forecast and drawing the possible path of future policy. Although no change is anticipated to be delivered in terms of interest rates after last November’s rate hike, the FX markets eagerly await both Minutes and the Inflation Report as they might indicate a potential path of interest rates in future.

The GBPUSD has been under pressure since last Friday as Brexit uncertainty has been weighing on Sterling due to the EU giving the UK government deadline to clarify its stance on customs that the UK government is unlikely to meet.

At 1:30pm today the Interest Rate Decision is expected to be left unchanged at 0.5%. The BOE Minutes, BOE Quarterly Inflation Report and the Monetary Policy Statement will be released at the same time. The BOE Asset Purchase Facility is expected to come in unchanged at £435B. GBP crosses could see a spike in volatility after this data is released.

USD

The calendar was light with economic data for the Dollar yesterday and was instead filled with speeches from Federal Reserve members. New York Fed President Dudley, usually neutral in his animal spirits, made dovish comments relating to the recent movements in the stock market saying this will unlikely effect the outlook for inflation and growth. Further, Chicago Fed President Evans, a notorious Dove, is after a pick up in inflation prior to a hike in rates stating recent form in the Dollar market has warranted a hold till mid-2018. Evans was, however, positive on outlook.

On the back of US Treasury yields rising and stabilizing equity markets, the Dollar was able to regain loses from the start of the year. Cable closed 1.3863 whilst against the Euro, a similar story as the Dollar rose to 1.2244 at close. The Dollar was also helped by the Senate agreeing on a deal to continue financing the Government.

EUR

Germany appears to be closing in on ending over four months of political uncertainty after Angela Merkel’s CDU and Martin Schulz’s SPD party successfully concluded coalition talks. However, the Euro weakened after Martin Schulz announced he was stepping down as leader of the SPD, and it wouldn’t be the country’s finance minister dampening hopes for increased fiscal spending that would have boosted growth in Europe’s largest economy.

Looking ahead, the euro should be under the microscope in light of speeches by European Central Bank members Weidmann, Villeroy, Mdersch and Praet.

Data to Watch:

07:00 EUR Current Account n.s.a. (Dec), EUR Trade Balance s.a. (Dec), EUR Exports (MoM) (Dec), EUR Imports (MoM) (Dec)
09:00 EUR Economic Bulletin
09:00 AUD RBA’s Governor Philip Lowe Speech
09:50 USD FOMC Member Kaplan Speech
12:00 GBP BoE Asset Purchase Facility
GBP BoE Interest Rate Decision
GBP Monetary Policy Summary
GBP Bank of England Quarterly Inflation Report
GBP BOE MPC Vote Unchanged
GBP BOE MPC Vote Cut
GBP Bank of England Minutes
GBP BOE MPC Vote Hike
12:30 GBP BOE’s Governor Carney speech
13:00 USD FOMC Member Harker Speech
13:30 USD Initial Jobless Claims (Feb 2)
USD Continuing Jobless Claims (Jan 26)
14:00 USD FOMC Member Kashkari Speech

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