TCA Market Reporter

Daily FX Report - 5 February 2019

by TCA Market Reporter


In contrast to Friday, economic data releases were relatively sparse during Monday which helped dampen volatility. In addition, currency markets are often quiet on Mondays following the monthly US emloyment data and the Asian new-year holidays also undermined activity. Although markets were still unconvinced over the dollar, none of the other major currencies were able to present a strong case for gains and the US currency held a firm overall tone. 

Pound Sterling (GBP)

The latest UK construction data recorded a slowdown in January with Brexit uncertainty again cited as the main culprit, although business confidence in the 2019 outlook held firm. Parliamentary members continued their search for realistic alternatives to the Northern Ireland backstop and, although EU Chief Negotiator Barnier and German Chancellor Merkel offered some flexibility, there was further uncompromising rhetoric from Ireland. Despite a sharp interim rally, GBP/USD dipped below 1.3050 and held just below this level on Tuesday while GBP/EUR failed to hold its best levels and settled around 1.1420. 

Euro (EUR)

Euro-zone investor confidence dipped to fresh four-year lows according to the latest February survey and markets remained very uneasy over the growth outlook. On-going Brexit uncertainty also had some negative Euro impact, especially with politicians increasing their warnings and need for preparations over a potential ‘no-deal’ outcome. EUR/USD was unable to gain sustained support and retreated to lows around 1.1425. There was little change on Tuesday with EUR/USD confined to narrow ranges while selling in the Swiss franc eased slightly as markets waited for fresh impetus. 

Dollar (USD)

US data had little impact with a weaker employment survey at odds with other recent data. White House economic adviser Hassett stated that there was still a lot to do to reach a US-China trade deal by the March 1st deadline, although there were market expectations that some form of deal would be reached given negative Wall Street implications if negotiations fail. The dollar secured a firm tone, but there was USD/JPY selling interest above 110.00 as markets waited for President Trump’s speech. The Australian dollar rallied as the Reserve Bank held interest rates at 1.50% and was less gloomy than expected over the outlook.
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