IFX Market Report: Friday 17th January 2020

The pound made hit its highest level for the week on Thursday as investors bets on an interest rate cut were put on hold. Traders are instead preparing for today’s retail sales data. In the three months to December there was a growth in the quantity bought of 1.6% as compared to the same period last year. Next week’s PMI data will help give clearer guidance on whether the economy has improved since the election of December 12th. Signs indicating otherwise would raise the probability of a rate cut by the end of the month.

The pound gained 0.23% against the dollar and 0.4% against the euro. Sterling is now dealing with the weight of an increasingly likely rate cut and fears that the UK will not be able to achieve a trade deal with the EU before the end of this year.

GBPUSD opened at 1.3032 and rose steadily across the day to close at a high of 1.3080

GBPEUR opened at 1.1686 and performed similarly, closing at a high of 1.1749

The dollar made gains on Thursday after positive economic data releases gave investors optimism following a phase-one trade agreement between the US and China. The dollar index was up 0.1%. Although the deal has rolled back several tariffs between the two countries, the 25% tariffs will remain in place for a range of China’s industrial goods. The same retaliatory tariffs from China will also stay.

Investors are looking forward to higher US economic growth though this should also be true for many global economies, with risk appetite predicted to rise. This can have a negative impact on the US dollar as demand for safe haven assets.

Elsewhere, the Swiss franc was weaker against the dollar after hitting its 16-month high yesterday.

EURUSD 1.1152 and after a steady morning, fell sharply in the afternoon to a low 1.1132 shortly before closing

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