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Markets await PM May’s Brexit Speech

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USD

The dollar buckled against the yen on Friday as tensions simmered on the Korean peninsula, though the sharp divergence between U.S. and Japanese monetary policy kept the greenback on track for a winning week against the yen. Yesterday, the greenback enjoyed a strong rally against its contemporaries as economic reports turned out stronger than expected and underscored the Fed's tightening bias. The Philly Fed index rose from 18.9 to 23.8 while initial jobless claims fell to 259K from 282K against the predicted 302K figure. Services PMI and the US flash manufacturing due today. 

EUR

The common currency followed the bulls as the ECB President Mario Draghi signalled optimism about the fiscal recovery in the Eurozone. In his testimony, the ECB President mentioned that the financial system poses a lower risk to the economy. Euro zone PMI readings came in strong today from Germany and France and have allowed the shared currency to keep climbing.

GBP

Sterling traded within a tight range against the dollar on Friday while investors waited for a speech by British Prime Minister Theresa May in which she is expected to try to rescue stalled Brexit talks. Investors will watch to see if May can offer enough to European Union negotiators to persuade them to move talks forward, without angering Eurosceptic members of parliament who have the power to destabilise her government.

CHF

The Swiss currency recovered it’s footing after the Fed decision as risk appetite took a hit. The Swiss trade balance, however, turned out weaker than expected at 2.17 billion CHF versus the projected 2.41 billion CHF reading. As no reports due from the Swiss economy today, the currency may sensitive to market sentiment. 

JPY 

The Japanese currency edged a notch lower after the Bank of Japan decision kept the pace of JGB purchases unchanged and maintained interest rates at current levels. The BOJ also kept a slight easing bias as hinted by Governor Kuroda during the press release. As there are no reports due from Japan today, risk sentiment could be the main driver for the currency. 

Gold

Gold recovered from a four-week low on Friday as investors sought a safe haven from geopolitical uncertainty caused by rising tensions between North Korea and the United States. North Korea said on Friday it might test a hydrogen bomb in the Pacific Ocean after Trump vowed to destroy the country, with leader Kim Jong Un promising to make a "mentally deranged" Trump pay dearly for his threats. The yellow metal is often used as a refuge in times of political or economic turbulence while assets considered risky such as stocks are dumped.   Spot gold was up 0.5 percent at $1,296.89 an ounce, as of 1037 GMT, having hit a four-week low of $1,287.61 in the previous session.

Oil

Oil prices were narrowly higher on Friday as the market waited to see whether major oil producers would back an extension to output cuts beyond March at a meeting in Vienna. The ministers from OPEC nations and others led by Russia will discuss a possible extension to an agreement under which producers are cutting output by 1.8 million barrels per day (bpd). They are also expected to discuss the idea of monitoring exports to assess compliance. Brent crude futures were at $56.51 a barrel at 0725 GMT, up 6 cents, or 0.11 percent, from their last close.  U.S. West Texas Intermediate (WTI) crude futures were up 10 cents, or 0.2 percent, at $50.65 per barrel.

Economic Calendar (all times in GMT)

  • EUR ECB President Speech (13:00)
  • GBP UK PM Theresa May’s speech (time unannounced)

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