Can Congress and US data stem the Dollar bleeding this week?

Last week the US Dollar continued to soften as economic data and politics failed to provide a boost. In terms of economic data, US initial jobless claims increased for a second consecutive week possibly a sign that economic growth may be cooling or faltering. Meanwhile, US second-quarter GDP contracted at an annualised rate of 32.9% after a 5.0% decline for the first quarter. This was the sharpest quarterly contraction on record by a substantial margin albeit expected given the crisis. With a unanimous vote, the Fed maintained the Fed Funds rate, in the 0.00-0.25% range, in line with consensus forecasts. Chair Powell stated that the evidence suggests that the pace of economic recovery had slowed since June and the pandemic is a disinflationary shock. He added that there is clearly a risk of a slowdown in the rate of growth and the labour market has a long way to go to recover. US politicians continue to debate whether to approve a fourth fiscal stimulus package as urged by Fed Chair Powell last week. The problem is that Congress is supposed to go into recess on Friday and some of the existing measures have expired. Sterling is on the front foot as data and comments boost the economy. UK mortgage approvals increased sharply to 40,000 for June from 9,300 the previous month. Further evidence from the Nationwide house price index show prices increased by 1.7% following the stamp duty tax cut. Also, the CBI retail sales report surged in July

2020-08-04T14:06:33+00:00August 3rd, 2020|

FOMC Meeting and US and EZ GDP Set for Release

Last week, the Euro pushed to the highest level seen against the US dollar since 2018 following the agreement between the EU 27 member states on how the Recovery Fund will operate. Leaders of 27 European Union countries reached a unanimous agreement on 750 billion euros ($860 billion) in coronavirus recovery funds, divided into grants worth 390 billion euros and low-interest loans worth 360 billion euros. It was the breakdown that took time to agree. It was vital that this was passed as the funds will be raised by the EU Commission using its AAA rating while there will be changes to EU rebates. The AAA rating means they will be able to borrow cheaper as a collective rather than individual countries; for example, Greece’s S&P rating is BB-, this is 9 notches lower than AAA. As a result, EURUSD has pushed circa 4.5% higher from the low of the month. In the meantime, sterling benefited against the US dollar as a result of the move on EURUSD but subsequently moved lower against the single currency. GBPUSD is now trading at its highest level since March against the US dollar despite ongoing uncertainty about the progress in talks between the EU and the UK on their future relationship. Economic data also helped pushed the currency higher as retail sales, service and manufacturing data all improved. The US dollar was on the back foot as concerns about deteriorating relations with China and that the US economic rebound is faltering prompted

2020-07-27T16:45:30+00:00July 27th, 2020|

Are You Prepared for Brexit Volatility?

We cannot predict the markets, but we can help you navigate them Sterling’s volatility is compounded by three factors, global COVID-19 sentiment, Brexit trade talks and BoE policy. It is worth noting that in the 4 years since the EU referendum we have seen Sterling trade in a large range (circa 36 cents against the US Dollar and 26 cents against the Euro). With the fallout of COVID-19 still unknown, the impacts could be felt harder by some businesses. We have compiled FX forecasts using data taken from over 40 financial institutions in an effort to predict the high, low and mean rates for the next 6 months: covering the phase of negotiations between the UK and EU and the impact of COVID-19. As can be seen, there are large differentials between the high and lows which highlight the potential volatility that could happen during this period as we ride ebbs and flows of progress and setbacks in the forthcoming talks. Download the PDF report for the details: Infinity_FX July Forecasts Are you managing the risk of your FX exposure? 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

2020-08-12T10:15:53+00:00July 24th, 2020|

EU Summit Continues Ahead of Service and Manufacturing Data from the UK and Eurozone

Last week Sterling was treading water as it continues to deliberate what COVID-19 and Brexit means for the longer-term prospects of the nation. Last week’s reading monthly GDP highlighted this uncertainty. The monthly GDP saw a 1.8% monthly rise in May, well below expectations of 5.5%. In the meantime, UK employment data whilst better than expected, received a tepid response as several companies continue to announce job losses and there is concern that this figure could rise in August as the governments contribution to furlough payments drops with the employer making up the difference. US economic data continues to remain positive. Last week, US retail sales, industrial production and Philadelphia manufacturing data all reported better than expected readings. However, the tone remains cautious as new COVID-19 cases hit a record high in the US of excess of 75,000. The market remains cautious about what this could mean for the US economy. Whilst economic data remains positive, it is backward looking, and the market will keep an eye on COVID-19 and what impact it could have on future data. The focus of the week was on the EU economic summit with the market glued to developments surround the recovery fund. The meeting has extended beyond the weekend and will continue today. The EU recovery fund would be borrowed via instruments on the financial markets, to be paid back sometime after 2027. Leaders are at odds over how to carve up a vast recovery fund designed to help haul Europe out

2020-07-27T16:34:54+00:00July 20th, 2020|

Big Week of Economic Data Whilst Brexit and COVID-19 Concerns Remain

Last week was a mixed week for sentiment, with many eyes on the downside due to concern of an increase in COVID-19 cases in the US - new cases growing to north of 60k a day with Florida reporting in excess of 15k a day. In recent weeks, economic data from the US has been to the upside, but as a result of the recent surge Federal Reserve policymakers have warned that activity may be “leveling off” and that more fiscal support may be necessary. In the meantime, UK Chancellor of the Exchequer Rishi Sunak’s Summer Economic Update outlined the second phase of job retention measures. This has come in a three-step plan focusing on jobs, including a Job Retention Bonus to keep furloughed employees in work, a Kickstart Scheme for 16-24-year olds and targeted measures for hospitality and housing. Brexit newswires have been mixed and are likely to remain as such for the foreseeable future. It is difficult to say when exactly talks will conclude, given they had ended earlier than scheduled in the past two weeks; is this a good or bad sign? There were reports that the EU could be willing to compromise on the issue of fishing rights. Cabinet Minister Michael Gove said on Sunday progress was being made in talks but there were still divisions. Gove went on to say, “at the end of this year we are leaving the single market and Customs Union regardless of the type of agreement we reach with

2020-07-13T14:56:02+00:00July 13th, 2020|

Economic Outlook Q3 2020

Will the Reopening Signal Growth or Signpost Another Lockdown? The end of Q1 and beginning of Q2 saw the global economy in a position that it had not previously seen as lockdown hit the Western economies. Our Quarterly Report provides context on the UK, US and Eurozone markets of last quarter and highlights what we believe will be the focus of each of these regions over the coming months. In this report we will focus on the action central banks and governments have taken and the resulting effect on volatility. In this paper we will highlight some of the key factors that could drive GBP, EUR and USD exchange rates over the coming months as well as displaying institutional forecasts on GBPUSD, GBPEUR and EURUSD. Covid-19 may have started as a health crisis, but it quickly switched into an economic and social one. The US lost more than 20 million jobs in a two-month period. Growth forecasts globally were slashed by double figures as the world is facing a situation which it has not seen in modern times. In the second half of the quarter, we started to see green shoots emerge as lockdown restrictions eased across the globe. What does Q3 hold? Finally, we will provide some analytic data from two sources. The first is a survey of 200+ treasury departments which highlights their focus and their views of the lockdown duration. In the second, we will display the currency forecast taken from Reuters at the start of

2020-07-10T15:52:18+00:00July 10th, 2020|

July 2020 FX Forecast

By Jamie Jemmeson ACSI, MSTA at Infinity International We have collected the views of over 40 financial institutions and distilled this, to articulate a single view of the high, low and mean forecasts for the next 12 months. It is fair to say, that so far in 2020, financial markets have been very unpredictable; few could have predicted a global lockdown situation. As the global economy emerges from lockdown restriction it is interesting to see that financial institutions are split on what this means for currencies. “The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis.” Ben Bernanke Download the PDF report for the details: Infinity_FX July Forecasts 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 out the below form to receive an obligation free FX review: Request a FREE FX Review We’re here

2020-08-12T11:35:11+00:00July 8th, 2020|

Sentiment Remains to the Upside but Headwinds Persist

Last week it was a mixed week both in terms of data and sentiment. Starting with the downside, Covid-19 concerns and Chinese tensions increased. There was a rise in Covid-19 cases in several countries last week. The US recorded a record high of close to 60k new cases a day, prompting some reversal of restriction easing. Latin American countries have also seen an escalation. In the UK, Leicester was put into lockdown again, as the rest of the nation reduced restrictions further. In the meantime, in the geopolitical arena China’s passed its Hong Kong national security law resulting in sanctions from the US, whilst the UK expressed it displeasure. Despite the negatives, we saw risk sentiment increase. Signs of improving economic conditions were helped by positive reports about progress in developing a Covid-19 vaccine. The headline data release was the US labour data; the US gained 4.8 million jobs in June, far better 3 million expected. In addition, the unemployment rate fell from 13.3% to 11.1%. Central Bankers have also noted that so far, the economic rebound was proving to be stronger than forecast, this may have added to the more upbeat mood. The UK/EU trade talks were slightly disappointing as discussions between the chief negotiators broke up a day earlier than expected; it is assumed they will resume in the coming week. However, supporting Sterling was Chancellor of the Exchequer Sunak’s update to the House of Commons regarding the economic outlook. PM Johnson said that the focus of

2020-07-06T16:31:00+00:00July 6th, 2020|

Sentiment Takes a Dive Ahead of US Independence Day Weekend

Last week the focus was firmly on the prospects of a second wave of COVID-19 in the US. Last Monday in New York City, restaurants resumed sit-down service with outdoor-only seating. However, on Thursday, the US reported a new record for daily COVID-19 cases, with an increase of more than 40,000, exceeding the previous daily record in April. By Friday, Texas and Florida ordered bars and taverns to close. So far, new cases have been restricted to four states Arizona, California, Florida, and Texas which saw US daily case numbers jump sharply in June. The market will be watching closely as this story develops. If sentiment slides as a result of COVID-19 second wave fears growing, then the US Dollar could strengthen as a result. Compounding the decline in sentiment has been the mounting trade tensions. It was reported last week that the US is considering imposing additional tariffs on imports from the EU and UK. The IMF, meanwhile, revised down its 2020 global growth forecast to -4.9% from -3.0% in April. Focusing on the UK, it was publicised that air bridges are due to be announced over the coming days whilst the government announced that social distancing will be cut from 2 metres to just over 1 metre. On Friday, UK Chancellor Sunak stated that the UK is past the acute phase of the crisis while the furlough scheme will not be sustainable. Over the weekend Prime Minister Boris Johnson stated that the UK would be prepared to

2020-06-29T16:22:54+00:00June 29th, 2020|

Brexit Trade Talks to Impact Sterling in H2

By Jamie Jemmeson ACSI, MSTA at Infinity International UK/EU trade talks seem to be echoing a similar case of déjà vu as Brexit did. Looking back at the timeline we can see a similar scenario from former Prime Minister May’s “Brexit means Brexit” and “no deal is better than a bad deal” to current Prime Minister, Johnson’s “do or die” speech, pushing negotiation right to the limit.  This resulted in a transition deal following the UK’s exit of the EU on 31st January 2020. By the end of the year, both sides need to find ways around their respective differences, reach an agreement and leave enough time to ratify as well as implement the deal in legal text. Looking at what needs to be agreed, the task ahead is enormous, below is a selection of some of the subject matters that need to be in the agreement: free-trade agreement fishing waters agreement security co-operation legal jurisdiction financial sector alignment and Northern Ireland border complications It cannot be ignored that the COVID-19 pandemic has complicated an already tense process. Leaders have been focused on the pandemic as they manage both the economic, health and social fallout. Brexit talks were reduced to video conferences, reducing the opportunity for rapport building often critical to diplomacy. The deadline to extend the the transitional agreement beyond December, expires at the end of June. The UK has rejected the prospect of an extension and has made clear. Unlike other targets, this was self-imposed as it was

2020-08-12T11:46:32+00:00June 25th, 2020|