Weaker Greenback and Pound


The U.S. Federal Reserve weakened the greenback yesterday as they reduced their projected interest rate increases to zero over 2019 and only a single hike in 2020. In recent years such Federal Reserve monthly statements have come to be the primary driver of the Forex market, as the market is driven mostly by the U.S. Dollar. Statements which contain a surprise in monetary policy, such as this one, can be the triggers which start strong multi-month trends. We may well now see the U.S. Dollar continue to weaken for some time, although we have seen it regain much of its earlier losses against some currencies over the course of today. Technically, we have not yet seen the kind of long-term breakouts that truly provide convincing technical evidence of a new long-term trend, with the New Zealand Dollar coming closest to fulfilling that requirement.

The other major Forex news is the British Prime Minister Theresa May’s harder line on Brexit which emerged as she addressed her nation Wednesday evening. In a seemingly heartfelt speech, she said that she has been trying to implement the nation’s direct democratic decision to leave the European Union, referring to it as the largest democratic exercise in the nation’s history. She accused the British Parliament of having acted irresponsibly, causing unnecessary delay and confusion which have harmed the country. She concluded by saying that she had asked for a short delay, to June, but would not be prepared to delay Brexit any further – a hint that she would (at least in theory) accept a “no deal” outcome if Parliament would not accept a deal before then. The Pound has fallen on the news, as analysts have concluded that she was following the wishes of her party, who are still determined enough in enough numbers to believe in principle that Brexit must be delivered. Markets are hoping to see Brexit abandoned, but May’s speech has made that less likely.

Adam is a Forex trader who has worked within financial markets for over 12 years, including 6 years with Merrill Lynch. He is certified in Fund Management and Investment Management by the U.K. Chartered Institute for Securities & Investment.