UK Employment Data, US Rate Meeting and President Biden Signs Executive Orders on Relief Package

Last week the global focus was on President Joe Biden inauguration as he became the 46th President of the United States and signed a flurry of executive orders, including addressing the COVID health crisis. Following his inauguration, the US Dollar weakened as speculation grew of the passing of the $1.9 trillion economic relief plan. This improved risk sentiment and pushed up equity markets; subsequently resulting in a weaker US Dollar. The other big focus was the ECB meeting where there were comments from various central bankers about the strength of the currency. As expected, the ECB held interest rates at 0.0% following the latest council meeting and also made no changes to the asset-purchase programme with bond buying under the PEPP programme continuing until at the least March 2022. The statement did note that the full envelope of bond purchases did not need to be used if there was an improvement in financing conditions. The central bank also stated that they are ready to recalibrate policy if there is a negative inflation shock over the next few months. ECB President Laggard stated that the bank was monitoring the forex rate very carefully and that currency appreciation is a drag on inflation. Laggard also stated that risks to the growth outlook were tilted to the downside, although the risk is now less pronounced. Given the absence of dovish references within the meeting and a weak dollar, the Euro strengthened. Sterling has remained resilient as the vaccination program continues to be

2021-01-25T17:39:42+00:00January 25th, 2021|

Biden’s Inauguration and Central Bank Comments to Remain the Focus

Last week we saw another one for the history books as the House of Representatives voted to impeach President Trump following the uprising at the Capital the previous week. This makes President Trump the first President to be impeached twice. President Elect Biden is due to be inaugurated on Wednesday. In the meantime, a stronger US dollar emerged this week for several reasons. Firstly, the single currency lost momentum after comments from various Central Bankers, including ECB President Lagarde, commented about the potential for verbal intervention if the currency continued to strengthen. Compounding Euro weakness were concerns over the ongoing COVID backdrop as German Chancellor Merkel stated that restrictions may need to be in place until April. Sterling made gains against the single currency but lost ground against the US Dollar. Conflicting comments from BoE officials on the likelihood of negative interest rates in the UK fueled fluctuations in Sterling. This is likely to remain a factor until the central bank’s report on negative rates is released next month. Keeping sterling positive was the ongoing momentum behind its vaccination programme. Th US Dollar made gains as risk appetite remained fragile with the new variant in the COVID strain from Brazil and the ongoing pressure and uncertainty this brings. President Elect Biden proposed a $1.9trn fiscal stimulus package this week, on top of the $900m package that was passed by Congress late last year. Biden will want to get these new measures through Congress as quickly as possible. However, with

2021-01-18T15:46:24+00:00January 18th, 2021|

Markets Continue to Monitor COVID Response, Washington Unrest, UK Negative Rates Debate and US Labour Data

Last week the market settled after the US Dollar touched 32 month lows to settling a relatively tight range. Unprecedented scenes in Washington dominated the newswires in the second half of the week with the ongoing debate and rumours of actions being taken to remove President Trump despite his tenure coming to end. In addition, the Democrats won the two Georgia Senate seats and effectively took control of Congress.In the UK, the new variant of COVID is resulting in a very serious escalation in infections and hospitalisations, but vaccinations to the most vulnerable groups and frontline workers is underway. The government is targeting about two million jabs a week to reach about 13 million by mid-February, with the hope that lockdown restrictions can start to be eased soon after. Bank of England Governor Bailey stated that markets had broadly been expected the Brexit trade deal that was secured. He went on to comment that GDP could slide by 4% as a result of the Brexit trade deal; but only time will tell.  It was also reported that a report a negative interest rates to be published at Feb’s MPC meeting.The key economic release and data focus was on the US labour readings. The economic data painted a bleak picture and highlight an economy on the slide; a challenge that President Elect Biden will have to tackle. The all-important nonfarm payrolls in the US fell by 140,000 in December, missing the market expectation of +71,000 by a wide margin. The market

2021-01-11T16:46:37+00:00January 11th, 2021|

Sterling Falls Despite Brexit Trade Deal and Oxford Vaccine

The final weeks of 2020 saw some big and impactful changes that have influenced exchange rates. Firstly, the protracted UK/EU trade talks concluded on Christmas Eve and was subsequently approved by respective parliaments. The market may take some time to decipher the actual impact on the UK economy. The main area where the trade deal falls short is for a equivalence framework between the UK’s and EU’s financial sectors. Considering 43% of the UK’s financial services operate overseas this could impact national GDP figures. Secondly, the UK MHRA regulator approved the Astra Zeneca/Oxford vaccine for use. This vaccine is much easier to distribute than the Pfizer version and the UK has also ordered 100 million doses with the rollout of the vaccine starting this morning. Despite the positive news, Sterling has fallen against the Euro and US Dollar as the UK looks set for another national lockdown. In the meantime, late in 2020, the Euro gained an element of support from the UK/EU trade deal providing some underlying relief over near-term trade trends. However, ECB Council member Rehn stated that officials are monitoring the Euro’s strength closely. He reiterated that, although the bank does not target exchange rates, appreciation does have important effects as it leads to a loss of competitiveness and affects the outlook for growth and inflation. Looking to week ahead, the market will be getting its feet back under the table to decipher the current state of play and investment environment. The prospect of further COVID restrictions

2021-01-04T17:32:08+00:00January 4th, 2021|

Christmas Cheer Halted Amid Tier 4 and Brexit Concerns

Sterling continued to buy the rumours and sell the facts surrounding Brexit and COVID-19. The rumours were that UK/EU Trade talks had turned the corner with large parts of the “level playing field” agreed leaving the prickly issue of fishing to be agreed. The result of the finishing line being in sight pushed GBPUSD up to 30-month highs. However, towards the end of the week Sterling retraced from the highs as another soft Sunday deadline was implemented once again by the EU. In another case of déjà vu we have seen this deadline elapse and talks continue. Hope remains that this will be resolved before the hard deadline as fishing only represents a very small industry in comparison to the remainder of economic activity on both sides of the Channel. Sterling is weaker this morning following the news over the weekend of the introduction of tier 4 restriction being introduced, and Christmas restrictions tightened following the revelation that the new strain of COVID-19 is 70% more transmittable. London and large parts of the south-east have now been placed into a higher tier resulting in non-essential shops closing and travel restrictions introduced. This was followed internationally as several nations banned flights from the UK. Compounding the negative sentiment was that UK health secretary Matt Hancock mentioned the restrictions could be in place for months. In the meantime, the Bank of England (BoE) once again put the UK on warning for negative interest rates.  Gertjan Vlieghe, a Monetary Policy Committee (MPC)

2020-12-21T16:17:31+00:00December 21st, 2020|

December FX Forecast

“Don't let the past steal your present. This is the message of Christmas: We are never alone.” - British-born American novelist Taylor Caldwell Brexit continues to be the dominate influencer behind wild swings in GBP exchange rates. As the Brexit deadline date fast approach's, the UK and EU officials remain at the negotiating table with both sides eager to get a deal done. COVID and on the UK/EU trade talks feel particularly apt when talking this subject matter. Many will feel that this has been a tough year but there is light at the end of tunnel with vaccines being approved and hopefully the saga of Brexit being finally resolved. However, unknowns remain resulting in wide high and low forecasts. We forecast a 1, 3, 6 and 12-month view of GBP/USD, EUR/USD and GBP/EUR rates. Download the PDF report for the details: Infinity_FX Forecast December Infinity International would be happy to offer a complimentary FX review of your current process to offer a fresh perspective and to highlight any areas that could be made more efficient. If you would like to organise a time for an exploratory conversation, please leave your details below. The review would encapsulate: Strategy ideation to align FX risk management with your business objectives FX volatility assessment to understand the impact of a significant FX rate Credit terms to ensure efficiency for cashflow when hedging currency (subject to approval) FX pricing to determine your current cost of your current provider vs Infinity International rate Fill

2020-12-15T13:40:39+00:00December 15th, 2020|

UK/EU Trade Talks Continue, BoE and FOMC Meetings and the Last Trading Full Week of 2020

Last week the main focus was on two news events in particular, UK/EU trade talks and the ECB meeting. Starting with the later, the ECB (European Central Bank) made no changes to interest rates at the latest policy meeting with the main refinance rate unchanged at 0.0% and in line with market expectations. The ECB announced that the PEPP bond-buying programme would be increased by a further €500bn with the scheme extended for a further nine months until March 2022. Central Bank President Lagarde stated that the decision on bond purchases was nearly unanimous and that the full amount of bond purchases would not necessarily be used. However, during the press conference the currency failed to weaken as the bank raised the 2022 GDP growth projection to 4.2% while inflation is set to remain below the target through the next three years. In the meantime, Brexit dealt another dish of déjà vu as trade talks were once again extended from the self-imposed soft deadline. During the week we saw sterling weaken as unease grew as the probability of “no deal” reached 50%. On Sunday, the European Union and the UK agreed to keep trade deal negotiations going beyond the latest deadline. A call between UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen added fresh impetus to the push to get a deal done, with the pair saying the two sides will go the "extra mile." The show must go on. COVID-19 cases globally continue

2020-12-14T15:35:38+00:00December 14th, 2020|

UK/EU Talks Continue Whilst the Market Will Monitor ECB Tone Surrounding Recent Currency Highs

Last week we saw a significant weakening of the US Dollar following comments from FOMC Chair Powell.  Fed Chair Powell stated before Washington that the US Federal Reserve will continue to provide strong support and are committed to using all the tools to get through this period - does this put negative rates back on the table? In the meantime, at the same hearing Treasury secretary Mnuchin urged Congress to provide another £300bn pay check protection programme. The net effect saw the USD Index move to its weakest level since Apr 2018. Compounding the negative tone was the always highly anticipated US jobs numbers in Friday’s Non Farm Payrolls. The headline figure posted a figure of 245k, notably missing expectations of 460k, while the prior reading had been revised lower to 610k from 638k. This only highlighted the softness of the economy. UK/EU Trade Deal Negotiations Sterling remains sensitive to UK/EU trade talk speculation. There was optimism of a deal potentially being struck during the previous week. However, talks turned sour on Thursday evening as both claim the opposition were to blame for the breakdown. Friday saw talks resume whilst weekend negotiations were halted before restarting today. The stark reality is that the clock is ticking and the prospect of “no deal” is becoming more of a reality. This was further highlighted as France warned it could veto a trade deal between the UK and the European Union if it doesn’t like the terms. On a positive, optimism that

2020-12-07T16:54:36+00:00December 7th, 2020|

US Returns to the Market After Thanksgiving Whilst UK/EU Trade Talks Remain the Focus

Another week of procrastination with regards to UK/EU trade talks, with news continuing to ebb and flow between positive and negative rhetoric. Brexit talks are set to resume on a face-to-face basis as they enter what has been widely described again as a crucial week. EU chief negotiator Barnier is reported to have had a briefing with EU fishery ministers on Friday, which has prompted speculation that a compromise on a key area of contention is imminent. However, there was no official confirmation from either side over the weekend, with both highlighting this as a sticking point. Some analysts are saying that a deal must be done next week to allow time for votes in the UK and European parliaments before year-end. However, there are reports that suggest that preparations are being made for emergency voting sessions post-Christmas which could warrant more time. In the meantime, question marks over the UK fundamental picture remain fragile. The services sector declined to 45.8 from 52.3 previously, showing that the sector contracted. This also stated that unemployment continued to decline sharply, although overall business confidence strengthened to the highest level for over five years amid optimism over vaccine developments. In addition, Bank of England chief economist Haldane noted optimism over a recovery in the economy for 2021, although he also warned that there would be permanent scarring present. Chancellor Sunak, in his spending review stated that the economic emergency had only just begun and there would need to be a further £55bn in

2020-11-30T14:59:53+00:00November 30th, 2020|

UK/EU Trade Deal Deliberation Continues as the US Has a Shortened Week for Thanksgiving

Last week FX markets were held in a holding pattern as overarching themes failed to deliver any further clarity. President Trump continues to challenge the result of the election and hinder President Elect Biden’s transition to power. This continues to drag on but is having very little impact on the FX market. In the meantime, the US Dollar made gains on a risk aversion move as new COVID cases in the nation escalated to a new record high of almost 200,000 in a single day. The escalation forced New York to close its schools. There has been positive news surrounding a COVID vaccine; Pfizer upgraded its assessment of the effectiveness of its vaccine to 95%, almost matching the Moderna product, while the University of Oxford/AstraZeneca vaccine also reported promising results in phase-two trials. However, question marks remain about the timing of both the vaccines being signed off and the subsequent roll out. Sterling continued to trade within its ranges and fluctuated on UK/EU trade talk  developments. News remains mixed, depending on what news source you decide to read. There were source reports that a Brexit trade deal could be reached by early as this week, although there was still a high degree of uncertainty around the outlook. However, reports from the EU suggested that several members had asked to European Commission (EC) to publish it’s “no deal” contingency measures as difficulties remain. On Thursday, Brexit trade talks had been halted due to a positive Coronavirus case for one of EU

2020-11-23T14:25:05+00:00November 23rd, 2020|