Cable rates are at a 2-month high, with mid-market levels currently fluctuating just above 1.30.
Despite the slight drop-off last week, which saw Sterling lose around 2 cents against the Greenback, the pairing appears to have found stability above 1.30, which for the best part of the past 6 months, has been a resistance which has seen the pairing weaken shortly after.
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It will be interesting to see whether cable rates will maintain a position above this level, since much of the recent increase in Sterling sentiment was following initial reports of clarity surrounding the Brexit process, but this has since changed as a ‘no-deal’ scenario still exists as a possibility.
Economic data releases for the start of 2019 appear to have also dampened reports towards the end the year, that the US economy was expressing signs of a slowdown, so there are arguments to suggest that if markets begin to price in a stronger economy, we could see USD gains in the short – medium term.
After 4 hikes to the US interest rate in 2018, the Federal Reserve announced last week there would be no change to the current level of 2.5%.
This move has gone against the Fed’s initial outlook for 2019 towards the end of last year, as it was suggested an early hike to rates could be on the cards, but hindsight would suggest the decision has been made in order to balance the better than expected GDP growth, historically low unemployment and rising inflation, in the face of concerns surrounding a global economic uncertainty.
Investors will now be keeping an eye on upcoming data releases to see whether reports of a US economic slowdown are substantiated, so focus will turn to the industry PMI and jobless data released throughout the week, but following the strong Nonfarm payroll data released last Friday, which saw over 300k new jobs created in January, it could be argued that some of these claims have already been put to bed.
However, since the partial government shutdown which lasted 35 days, has reportedly cost the US economy $11billion, it remains to be seen what sort of effect this might have in the longer term, which could lead to USD weakness as a result.
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