Daily Market Comment

17.05.2013

Persistently weak data from the US this week finally caught up with the dollar yesterday, as it fell back against a basket of major currencies. Weak US housing starts, jobless claims and survey data all hit dollar sentiment and saw the currency finish the day down against the euro, sterling and the yen. The dollar had defied conventional market logic in the past few days by holding on to recent gains, despite a string of poor of US data releases. However, it has been a bit of a roller coaster rise for the dollar in the past 24 hours. Comments overnight by a number of Fed officials indicating that its asset purchase programme may soon start to be scaled back, saw the dollar reclaim some lost ground. The future direction of US monetary policy is now the key driver of forex markets. Thus, all eyes will turn to the Fed Chairman, Ben Bernanke and his testimony to Congress next Wednesday to see what guidance he gives on the Fed’s asset buying programme. The markets will be seeking clarity in this regard.

Weekly Market Brief

17.05.2013 Weekly Market Brief - 17th May

Schedule of key data releases and market events for the week commencing 20th May.

Central Bank Watch

02.05.2013 ECB Watch May 2013

The ECB today cut the refi rate by 25bps to 0.5%, the first reduction in rates since last July. There were strong indications from Mr. Draghi, at last month’s ECB press conference that a rate cut was under active consideration. Hence, today's move was no surprise, especially after the string of weak eurozone economic data released in recent weeks. What was a surprise today, though, were the indications from Mr Draghi that the ECB may cut rates again if the economy remains weak. Indeed, Mr Draghi did not rule out the possibility of negative interest rates via a cut in the deposit rate to below zero.

Forex and Interest Rate Monthly

13.05.2013 Forex and Interest Rate Outlook May 2013

Continuing very loose monetary policy everywhere, with the ECB cutting rates further and very aggressive QE programmes being pursued in both the US and Japan Currencies, apart from the yen, settle down again to range trade after some volatility at the start of the year. The Euro likely to remain in the doldrums given weak eurozone economy. Dollar looks to be well underpinned by relative strength of US economy and could make gains later in 2013 if speculation builds that the Fed may start to scale back on QE. Sterling recovers some lost ground and should remain fairly stable unless the new BoE Governor pursues a looser policy stance in H2 2013.Yen to lose more ground as aggressive QE triggers outflows by domestic investors in search of higher bond yields.