Trade Concerns Weigh on USD

The dollar remains under pressure on trade war concerns. Headlines remain key today given a lighter data calendar.

Previous Day's Market Highlights

Macroeconomic indicators, Brexit headlines, and monetary policy hints all converged to move sterling higher across the board. By the end of the week, sterling had regained 1.14 against the euro and 1.41 against the dollar. Knee-jerk highs above 1.15 and 1.42 proved short-lived but did allow for the pound to briefly hit its strongest levels against the euro since June 2017. Investors will be closely watching to see if the pound can sustain this run higher given that for some months it has struggled to hold moves below 1.12 or above 1.14.
 
The Canadian dollar jumped on an acceleration in inflation to 2.2%, gaining around 0.6% against the pound to push the rate back below 1.8150, marking the loonie’s strongest levels against the pound in a week. While the BoC has recently been cautious on additional hikes after raising rates in January for the third time since mid-2017, this rise above the Bank’s target inflation rate could increase speculation that the Bank’s next hike will come sooner than previously expected. 
 
Concerns over a trade war weighed on market sentiment as tensions between the US and China increased. Trade fears have put broad pressure on the dollar and equities, and US stock markets had their worst week in over two years. A greater-than-expected rise in Durable Goods Orders was able to support the dollar only briefly.   
 
Fed Member Bostic said Friday that he favours two additional rate hikes this year, which is in line with current Fed projections.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1456 1.1538 1.1150 3.36%
GBP/USD 1.4162 1.4220 1.3711 3.58%
EUR/USD 1.2361 1.2447 1.2154 2.35%
GBP/AUD 1.8307 1.8407 1.7599 4.39%
GBP/NZD 1.9449 1.9644 1.8914 3.72%
GBP/CAD 1.8206 1.8417 1.7617 4.34%

Today's Market Highlights

The data calendar is quieter today with only the mid-level Chicago Fed National Activity Index scheduled (13:30 BST). Note that UK clocks changed over the weekend and US releases now are back at their usual UK times. Fed members Dudley, Mester, and Quarles will speak this evening, and while market movement may be relatively limited given that only Mester is expected to speak on the economy, investors will pay close attention for any hints that the speakers expect more than three hikes this year.
 
Overall, the calendar is quieter this week; items to keep an eye on include final estimates of Q4 GDP from both the US and the UKGerman CPI, US Personal Consumption Expenditures, and Canadian GDP. Friday and Monday are Bank Holidays for Good Friday and Easter Monday.
 
Brexit and trade headlines remain in focus as investors watch for any further developments. Over the weekend, there were reports that the US and China are working towards trade solutions; the dollar has remained under selling pressure this morning.

Today's Economic Calendar

Time Currency Release Consensus Previous
13:30 USD Chicago Fed National Activity Index (Feb) 0.19 0.12
17:30 USD Fed's Dudley Speaks
21:30 USD Fed's Mester Speaks
00:10 USD Fed's Quarles Speaks
01:45 AUD RBA Assistant Gov Kent Speaks

Caxton