The new trading week may have opened with GBP bullishness but as the Monday session ended sterling slipped across the board into Tuesday’s UK inflation release. Expect GBP to weaken further on softer-than-expected inflation even though it is certainly a good thing for the British economy. Don’t expect much follow through on weakness. Sterling may look weak on fundamentals but recent price action favors GBP.
No real surprises from the $FED or the BoJ yesterday as both left interest rates unchanged. With equities higher still after the FOMC statement, it is hard to see risk currencies fall more from here. While the USD seems to be trading on fundamentals (rising on good US news after both US NFP and somewhat hawkish Fed statement), it remains to be seen if that is a new shift in the market or if risk still rules investor sentiment.
Lots of big talk made for lots of nice moves in the forex markets today. These central banks are only warming up with comments from Japan today ahead of their official interest rate decision tomorrow. But the $FED has taken to jawboning too. They also release a decision tomorrow but have been in the press for weeks. Lots of focus has been on the $USDJPY with its recent moves higher which should make the conspiracy theorists among us very anxious for Tuesday trading. At any rate, sterling flows were liquid in both directions today depending on your currency pair.
This week rounds out the major central bank announcements for the month of March. Three central banks are on tap to release decisions on monetary policy: the Bank of Japan, the Federal Reserve, and the Swiss National Bank. Of course, the Fed is the highlight. But with the Fed in the news so much last week, one has to wonder what more the Fed can give the markets.
Very muted price action this trading session leaves sterling still weak after yesterday’s pullbacks. The market has entered its wait-and-see mode as we await the RBNZ later tonight and BoE, ECB, and BoC on Thursday morning. As boring as today may be, it gets just as interesting in the next 24 hours.
Sterling is strong across the board this morning. Despite less-than-expected UK Services PMI, sterling has managed to catch a bid versus many of the major currency pairs this trading session. The only exception at the moment is the $EURGBP, as euro strength battles sterling strength making for a very small range in the pair today.