Weekly Review Feb 13
Here is a short summary of what happened in the major currency markets in the second week of February, 2017.
The US economic calendar was relatively light during the week and did not have a significant market impact. The dollar was weighed down by concerns surrounding trade policies, although ranges were relatively narrow
President Trump announced that he would lay-out his tax proposals within the next 2-3 week which triggered a fresh burst of optimism surrounding the dollar.
In his press conference with Japanese Prime Minister Abe, Trump stated complained about devaluations and stated that the US, China and Japan would soon be on a level playing field.
EUR/USD held above 1.0600 with USD/JPY settling just above 113.00.
Bank of England external MPC member Forbes stated that she was more concerned surrounding the inflation outlook and, given the inflation concerns, higher interest rates could be needed to control these risks. Later in the week, it was confirmed that Forbes would leave the bank at the end of June. UK industrial production data was stronger than expected with a 1.1% gain for December following a 2.0% gain the previous month with the trade data also slightly better than expected.
The UK government secured House of Commons approval for the Bill allowing a triggering of Article 50 and the legislation will now pass to the House of Lords.
Sterling continued to attract support on valuation grounds as EUR/GBP retreated to test the important 0.8500 level while GBP/USD recovered from lows near 1.2350 to trade around 1.2500.
Euro-zone political and developments were an important focus during the week. Greek debt returned to the market radar after a report from the IMF stated that Greek debt was unsustainable and on an explosive path. There was also no agreement ahead of a crucial Eurogroup meeting on February 20th on releasing funds to Greece for scheduled debt payments.
The French Presidential election as also an important focus with National Front leader Le Pen continued to lead first-round opinion polls. With centre-right candidate Fillon still embroiled in controversy, there were further concerns over political instability.
French bond yields continued to move sharply higher early in the week, although there was a reversal over the second half with high volatility.
Both the Reserve Bank of Australia and Reserve Bank of New Zealand (RBNZ) left interest rates on hold at 1.50% and 1.75% respectively. The RBNZ warned that the currency was too strong which triggered sharp downward pressure on the New Zealand dollar.
There was a firm tone surrounding commodity prices, especially after better than expected Chinese trade data which helped support the Australian and Canadian dollars.
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