Breaking News
Investing Pro 0
Cyber Monday SALE: Up to 54% OFF InvestingPro+ CLAIM OFFER

More Losses Ahead For EUR And GBP?

By Kathy LienCurrenciesFeb 28, 2018 21:49
uk.investing.com/analysis/more-losses-ahead-for-eur-and-gbp-200200166
More Losses Ahead For EUR And GBP?
By Kathy Lien   |  Feb 28, 2018 21:49
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
EUR/USD
+0.05%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
GBP/USD
+0.03%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
USD/JPY
-0.05%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
USD/CHF
-0.01%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
AUD/USD
+0.09%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
USD/CAD
-0.03%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Kathy Lien, Managing Director of FX Strategy for BK Asset Management.

Euro, sterling and the Canadian dollar ended the month of February at their lows. The Swiss franc, Australian and New Zealand dollars also saw significant losses and are hovering just above their weakest levels in 30 days. While USD/JPY is trading more than 100 pips above this same milestone, there’s no question that February was a difficult month for the pair. It extended lower Wednesday, confirming our view that the market interpreted Fed Chairman Jerome Powell’s comments on the economy and monetary policy to be more negative for risk appetite than the U.S. dollar. The Dow Jones Industrial Average, which started the day in positive territory ended down 380 points. This sell-off fills the gap at the start of the week and puts stocks at risk of further losses. The latest U.S. economic reports also raised concerns that growth could slow after the Federal Reserve raises interest rates in 3 weeks. Fourth-quarter GDP growth was revised down to 2.5%, the Chicago PMI index dropped to its lowest level in 6 months while pending home sales fell by the largest amount since 2013. While none of these reports is a game changer for the Fed, coming at a time when investors are growing nervous about rising rates, they certainly add pressure on currencies and equities. Traders will be watching Thursday’s personal income, personal spending, jobless claims and manufacturing ISM reports closely to see if the weakness is reinforced. With U.S. stocks ending the day at their lows, USD/JPY is vulnerable to additional weakness.

The month of March could also kick off with more losses for euro and sterling. Starting with the single currency, on a technical basis there’s support near 1.2265 (the 2018 low) but fundamentally, the Italian elections and Germany’s SPD vote results could encourage additional liquidation ahead of these weekend event risks. Data has been mixed – although Germany reported fewer unemployment claims, consumer price growth in the Eurozone eased slightly in February. Thursday is an important day for Switzerland with fourth-quarter GDP, retail sales and manufacturing PMI scheduled for release. Weaker retail sales and trade activity in the fourth quarter point to weaker growth. For the Eurozone, we only have revisions to PMI so the path of the currency will be determined by the market’s appetite for risk.

Sterling was the day’s worst performer, losing nearly 1% of its value against the U.S. dollar. Brexit negotiations have taken a turn for the worse and could quickly become a political crisis for Prime Minister May. The EU released a draft of its Brexit agreement and in it they proposed a “common regulatory area” for Ireland after Brexit. May responded by saying that “no UK prime minister could ever agree” to a separate customs agreement for Northern Ireland. This has long been a serious area of contention and despite reports of progress at the end of last year, it has returned as a potential deal breaker. The draft Brexit agreement also brings back the issues surrounding the European Court of Justice. The UK doesn’t want to be obligated to the ECJ’s decision but the EU wants disputes over Brexit to be settled by a joint committee. So in a nutshell, the EU hasn’t eased on their initial demands and instead, their stubbornness has set back Brexit negotiations. Unfortunately Prime Minister May’s speech on Friday isn’t going to instill any confidence in her ability to get a deal done. UK negotiators will continue to work with the EU on reaching a deal and the main focus on Friday will be how amenable she is to their terms. With U.S. stocks ending the day at their lows, we expect further weakness in sterling. Manufacturing PMI numbers are scheduled for release on Thursday and based on the drop in the CBI index, softer activity is expected.

All 3 of the commodity currencies traded lower against the greenback Wednesday with the Canadian dollar leading the slide. USD/CAD rose to its strongest level in 2 months on the back of falling oil prices, U.S. dollar strength and risk aversion. According to the latest industrial product and raw material price reports, inflation increased slightly in the month of January. The main resistance level now for USD/CAD is 1.2900 and if stocks continue to fall, the pair could test this level ahead of Friday’s GDP reports. The Australian dollar gave up earlier gains and turned negative versus the U.S. dollar after the London close while NZD was under water throughout the North American session despite stronger business confidence and activity according to ANZ. Softer Chinese manufacturing activity validated the declines in both currencies. At the Asia open, we learned that job ads in New Zealand plunged and manufacturing activity in Australia slowed. Australia’s report could extend the losses for the currency.

More Losses Ahead For EUR And GBP?
 

Related Articles

More Losses Ahead For EUR And GBP?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email