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Hawkish Federal Reserve remarks buoy US dollarThe Federal Reserve’s "hawkish cut" last week seems to have taken markets by surprise.
The euro jumped to its strongest position in a year-and-a-half versus the US dollar on Tuesday amid contrasting stimulus news and vaccine optimism. Sterling eased off six-week highs ahead of crucial UK economic data later this week.
News of encouraging progress towards a COVID-19 virus vaccine and the passing of the EU’s €750 billion fiscal rescue package lifted risk assets on Monday.
A lack of an agreement among EU leaders over the bloc’s proposed €750 billion rescue package failed to derail the euro last week. Sterling, meanwhile, was the worst performing major currency, partly due to some underwhelming UK economic data.
Read our latest analysis of the Latin America currencies: Brazilian Real (BRL), Mexican Peso (MXN), Chilean Peso (CLP), Peruvian New Sol (PEN) and Colombian Peso (COP).
The ECB kept policy unchanged yesterday, with President Lagarde warning over the downside risks facing the Euro Area economy. US retail sales rose more-than-expected, in a day where US virus cases jumped to a fresh record high.
Today looks set to be a hectic day in the FX market, with investors awaiting this afternoon’s ECB meeting and US retail sales. Read on to find out more, and see how this morning’s UK labour data impacted the pound.
Positive signs of progress towards a COVID-19 vaccine boosted risk assets on Wednesday, lifting the euro to its strongest position in four months. Sterling also rose off a one-week low, helped by an increase in UK inflation data.
The pound fell back towards the 1.25 level this morning amid ongoing Brexit jitters and some weak UK GDP data. This week looks set to be a very busy one in the FX market, with a host of US data and major European policy announcements.
Fresh record high US virus numbers began to take a toll on the greenback last week, which fell against most major currencies. Investors now await this week’s ECB meeting and EU summit.
The ECB meeting on Thursday is unlikely to see any significant changes in the central bank’s extremely easy monetary policy. President Lagarde is likely to instead use this week’s meeting as an opportunity to again pressure European authorities to do more to support the bloc’s economy.
