STO Fundamental - Pound pops higher ahead of UK data

15 / 03 / 2017 | Market News
The day ahead certainly has the potential to be something of a game changer for financial markets. Dutch voters go to the polls in what is being seen as a critical test of support for the idea of a unified Europe. Any wavering here certainly has the potential to unsettle the common currency. We also have US inflation readings due, preceding tomorrow’s anticipated rate hike from the Fed. Although it seems unlikely today’s data will derail plans, any weakness here could raise questions over further policy tightening later in the year, putting notable pressures on treasury yields as a result.

The Traders’ View

Our prop desk is actively buying up long GBP and long AUD positions. We’re also seeing support for EUR/JPY although it’s notable that recent interest in equity indices is ebbing.

Fundamentals – Pound pops higher ahead of UK data


It’s fair to say that Sterling hasn’t had the best start to the week, but we’ve seen a notable jump higher on GBP/USD in the last few minutes. With the currency evidently looking oversold and some key economic releases due from London at 9.30am GMT, there’s some opportunistic bargain hunting in play. Although the unemployment reading may be the traditional headline number, it’s increasingly the average earnings figures that are driving the most interest as this will feed through to inflation. Anything that comes in much above the forecast 2.5% will have the potential to fuel speculation that the Bank of England needs to take a more hawkish line over interest rates.

We have a run of inflation figures due for release from Washington at 12.30pm GMT. An FOMC rate hike tomorrow is as good as nailed on, but some commentators suggest that any wobble on this reading could be the trigger for Janet Yellen to hit the pause button. That seems a little extreme given the run of strong numbers we’ve seen from the US of late, although it could well tone down the idea that we’ll see any more than three rate hikes in the year ahead.

Polling booths are now open across The Netherlands for the country’s general election and whilst an outright win for the radical far right is seen as being beyond reach, the key measure here is going to be just how far to the right the country has swung. It’s seen as being a barometer of sentiment across the European Union, and with elections scheduled for both France and Germany in the coming months, any uptick in nationalism could again raise questions over the long term viability of the common currency. We’re expecting to learn the results of the first exit polls before 9pm GMT, so Euro crosses could be in for a volatile evening.


This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.

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