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Brexit sucking up oxygen from the FX market

 

  • Brexit fear diminishing boosting GBP and other currencies
  • Eurozone IP rebounds, the first sign of stabilisation
  • Pressure increases for a rate cut in Australia

 

Quick overview

We can see a case for GBP to rise towards 1.40 helping recoveries in EUR and AUD, and weakening the USD more broadly.  But the outlook for a more sustained period of low EUR rates, no structural underweight in EUR, and limited demand for Euro assets suggest that its upside may be limited.  Rate cut expectations have reached a new peak in Australia, and the AUD should continue to remain heavy.  Chinese economic reports (trade, credit, PMIs) have been weak, Jan/Feb activity data are due later today.  The overall outlook for the USD remains mixed and cautious trading continues to be advised. Event risk will keep traders playing the short game.

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Greg Gibbs,
Founder, Analyst and PM
Amplifying Global FX Capital Pty Ltd