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Can pound hold onto multi-month highs today?

business-articlesCan pound hold onto multi-month highs today?
  • Brexit-based volatility to continue driving pound
  • Canadian dollar vulnerable to weaker inflation rate
  • Fed commentary limits US dollar appeal
 
Further pound volatility likely on Parliamentary vote
 
After hitting multi-month highs against many of its rivals yesterday the pound looks vulnerable to selling pressure unless the sense of investor optimism persists.
 
If MPs vote in favour of the ‘Cooper amendment’ today, effectively ruling out a no-deal Brexit, this could encourage GBP exchange rates to make fresh gains.
 
On the other hand, if the amendment fails to secure parliamentary backing the mood towards the pound could sour.
 
As uncertainty continues to dominate the outlook of the UK economy the upside potential of GBP exchange rates still looks limited in the near future, barring significant political developments.
 
 
Weaker inflation to drive Canadian dollar lower today
 
CAD exchange rates could see further losses this afternoon if the Canadian consumer price index eases as forecast.
 
Investors expect to see inflationary pressure ease from 2% to 1.4% on the year in January, pushing inflation below the Bank of Canada’s (BOC) target rate.
 
This would give the BOC greater incentive to leave interest rates on hold for longer, or potentially adopt a more dovish outlook in the months ahead.
 
Unless inflation shows signs of picking up on the month the mood towards the Canadian dollar looks set to deteriorate today.
 
 
US dollar fails to benefit from Fed commentary
 
After Federal Reserve Chair Jerome Powell reiterated the need for patience on interest rates the appeal of the US dollar has diminished.
 
Reaction to further comments from Powell is likely to prove muted this afternoon, limiting the potential for additional USD exchange rate volatility.
 
However, a widening of the advance goods trade deficit may expose the US dollar to fresh selling pressure this afternoon.
 
Any fresh signs of a slowdown within the US economy would leave USD exchange rates on a downtrend, especially if market risk appetite picks up further.
 
 
Upcoming Data:
 
Wednesday, 27th February 2019
13:30 CAD Consumer Price Index
13:30 USD Advance Goods Trade Balance
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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