Focus Remains on Core Matters However ECB and Growth Data Could Change the Outlook

Last week saw Sterling lift following the resumption of UK/EU trade talks, after the early week’s standoff between the two respective trading blocks. Whilst fishing and a level playing field remain sticking points, the objective is to conclude discussions for an emergency EU summit in the middle of November. In the meantime, UK Chancellor Sunak announced a more generous Job Support Scheme starting in November as furlough ends this week. Data from the UK remains mixed with retail sales posting slightly better than expected, but the composite PMI activity showed a slowdown in momentum. However, Brexit trade talks and negative rates continue to dominate newswires. The US election continues to pick up momentum with no real blows landed in the second and final Presidential debate with the US set to head for the polls next Tuesday. Meanwhile, it has been reported that early voting has accounted for nearly a third of the total vote numbers seen in 2016. The week ahead will continue to focus on the progress of the UK/EU trade talks, and the final furlong in the US election, although there are some concerns surrounding current Vice President Pence as members of his entourage have been diagnosed with COVID. The centre of attention for the Eurozone will be the ECB meeting on Thursday, the market is not expecting any stimulus until December so the market will focus on signposting by officials to confirm. Monday German IFO Survey  US New Home Sales Markets will

2020-10-26T15:56:35+00:00October 26th, 2020|

October FX Forecast

“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.” - George Soros Following the news that President Trump contracted COVID and the unknown implications and UK/EU trade talks being extended once again, the level of uncertainty has once again increased with some potential unexpected outcomes looming. With so many unknowns that could materialise, we have collected the views of over 40 financial institutions to articulate the high, low and mean forecasts for the next 12 months in an attempt to provide this information to businesses. As you will see, the forecasts still predict a high degree of uncertainty based on the differential. Download the PDF report for the details: Infinity_FX Forecast October 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

2020-10-14T13:31:35+00:00October 14th, 2020|

UK/EU Trade Talks Drive Sterling Whilst US Presidential Elections Remain in Focus

Last week we saw UK/EU trade talks continue with Sterling nudging higher as hope for a deal continues to grow as the time to complete discussions extends and erodes. EU Chief Negotiator Barnier stated that a deal was unlikely by the October 15-16th Summit and instead the meeting will be used as a stock checking exercise to understand the state of play. There were also reports that Barnier had been instructed to keep a hard-line position on fishing, however, UK Chief Negotiator Frost hinted that fishing measures could be phased in – a big change in tone to what has been stated previously. Ongoing signs of progress helped keep Sterling elevated. While Bank of England Governor Bailey stated that the economic recovery had been very uneven across the country and that risks are very much to the downside. He commented that he strongly hoped that there would be a Brexit deal, but the post-transition period would not be easy. He also commented that we must use policy aggressively and actively with the bank by no means out of firepower. In Europe, market data was quiet but, not without some rhetoric from the central bank. The Euro was hampered by fresh speculation that ECB President Lagarde would signal that the central bank would move towards further monetary easing, including the possibility that interest rates would be pushed deeper into negative territory. ECB President Lagarde reiterated that the bank does not target the exchange rate but is paying close attention to

2020-10-20T09:20:30+00:00October 12th, 2020|

Do US Presidential Elections Affect the Dollar?

First, how do the US presidential elections work? Can we expect the US presidential elections to impact currency? Ever since President Trump shocked the world with his victory there has been speculation as to whether this polarising character could win a second term. COVID-19 and an uncertain economy have added new dimensions to what may have already been a landmark U.S. election cycle. We will soon find out which way things will go as Americans will head to the polls on November 3rd. We work with many UK businesses who have US dollar exposure, and the key question they will want to understand is what impact the election could have on currency rates moving into 2021 and beyond. To better answer this question, we're going to highlight the differences in approaches from Biden and Trump and ultimately how this might affect the performance of the US dollar. Interest rate policy is unlikely to change direction because of COVID-19 and the fallout for the global economy. Central banks across the world have signposted that interest rates will be low for an extended period. The Federal Market Open Committee echoed this recently stating that they cannot see an increase in rates until 2023. However, there are plenty of areas where the candidates' policies diverge, for this opinion piece we are only focusing on some of the economic and foreign policy. Subject Biden Trump COVID recovery Proposing to spend trillions to create new jobs in clean energy, manufacturing, and caregiving. Signed legislation

2020-10-15T16:06:24+00:00October 5th, 2020|

Brexit News and COVID Developments Are Likely to Drive Sterling

Last week we saw the focus on the UK with both Brexit, growing COVID concern and the economic support mechanisms being discussed. PM Johnson announced a tightening of restrictions in England, while other parts of the UK also made some changes. Chancellor Sunak followed this up by announcing further support mechanisms to help following the end of the furlough scheme which expires at the end of October. There was also an extension of the VAT cut for the hospitality sector until March, and some changes to the lending schemes for businesses. Meanwhile, news on the Brexit front was more positive despite the Internal Markets Bill. It has been reported that a Brexit deal is in touching distance. There was generally a risk-off tone in the market as COVID cases across Europe continue to soar with Spain and France reporting over 10,000 rolling 7-day averages. Economic data over the past few months have generally pointed to a stronger-than-expected initial rebound in economic activity in the UK, US and the Eurozone. German September IFO survey showed rises in current conditions and expectations, UK GfK consumer confidence measure rose to a six-month high in September and US manufacturing PMI rose. Looking to the week scheduled to see another set of ‘formal’ negotiations between the UK and the EU on the long-run relationship. Some reports this week have pointed to breakthroughs on some key sticking points. However, the situation remains uncertain and the late December deadline for the end of the transition phase

2020-09-29T08:51:02+00:00September 28th, 2020|

Sentiment Concerns Emerge Ahead of Packed US Calendar Including Virtual Jackson Hole

Last week we saw the US Dollar remain under pressure as economic data raised some question marks about its recovery. A leading indicator for employment, the weekly jobless claims, increased back above a million posting a figure of 1.1m, which was greater than the forecast of 930k. Compounding the recovery question marks was the Philly Fed Manufacturing data which was lower than expected as well as down from previous reports, suggesting that momentum is slowing. Keeping the Dollar under pressure was the sentiment in equity markets, with news from Pfizer that its Covid-19 vaccine was on course for regulatory review in October, has lent support. Sterling had a whipsaw week as both economic data and trade talk news drove the price. Sterling moved lower initially as speculation mounted that tensions between the UK and EU were raised during their trade talks. It was reported in the Financial Times that Brussels has rejected the UK’s opening demands for continued wide-ranging access to the EU for British truckers. During Friday’s press conference, Sterling once again came under pressure following comments from negotiators Michel Barnier and David Frost. The EU negotiator stated that he was "disappointed" and "concerned", whilst UK negotiator David Frost spoke of "little progress". Meanwhile, economic data continues to remain positive for the UK. Retail sales, services and manufacturing data all improved highlighting that the recovery’s momentum is continuing post easing restrictions. It will be interesting to see if the UK can continue this once the government’s schemes end - Furlough and Eat

2020-08-24T12:00:12+00:00August 24th, 2020|

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|

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|

“Risk On” Overshadows Lack of Progress in UK/EU Trade Talks

Sterling rallied last week despite the lack of progress in the UK/EU trade talks. The “risk on “tone took centre stage downplaying the negative sentiment surrounding the UK/EU trade talks. Equity markets surged with several markets up by more than 8% for the week. The US dollar slipped against both the euro and sterling. The positive tone was further confirmed with the oil price rising to its highest level since early May. The surprise data of the week was the US employment data, some forecasts posted expectations of a further reduction in jobs between 7.5m- 10m. However, non-farm payrolls rose by 2.5m last month. This could be a remarkable turnaround. The unemployment rate was expected to be close to 20% not far off the Great Depression peak of 24.9%. The increase in jobs pushed the rate down to 13.3% in May, from 14.7% in April. In the meantime, as expected the latest round of UK-EU trade talks showed no progress on major areas of contention, according to Brussels’ chief negotiator. Prime Minister Boris Johnson and EU Commission President Ursula von der Leyen will meet at a yet to be confirmed date this month to bridge gaps in the two sides’ mandates. Sterling has been resilient despite the lack of progress, which may be down to a case of déjà vu as far as talks between the two parties is concerned. The ECB also helped improve sentiment as it over delivered by increasing its PEPP envelope by €600bn to €,350bn

2020-06-22T15:03:48+00:00June 8th, 2020|

Market to Focus on UK/EU Trade Talks Whilst US Unemployment Could Hit 20%

Last week Sterling manged to reclaim some of the losses of recent weeks as comments from various BoE officials helped taper concerns of the prospect of negative interest rates ahead of the economy preparing to reopen. Today, schools reopen their gates to a limited number of year groups, car showrooms and open-air markets are due to reopen as are non-essential retailers in a couple of weeks’ time. This could give the economy a further boost. However, gains maybe limited as UK-EU trade talks are scheduled. Across the Channel we saw the European Commission (EC) announce a 750-billion-euro ($824 billion) plan to prop up the EU economies hammered by the coronavirus crisis. Under the proposal, the EC would borrow the funds from the market. The EC will disburse two-thirds of this in grants and the rest in loans, with much of the money going to Italy and Spain, the worst affected by the pandemic. In the meantime, the US Dollar was weaker as the “risk on” tone increased as the EC released their stimulus measures and the easing of lockdown. However, US-China geopolitical tensions could have an impact on market sentiment if we see this increase. This week the calendar is packed with both political events and economic data taking centre stage. The UK will be focus on the tone of the trade talk talks surrounding the future relationship between the nation and the EU. These will be led by the UK’s David Frost and the EU’s Michel Barnier, with

2020-06-22T15:05:07+00:00June 1st, 2020|