Analysis / Daily / Finance / forex / Money

Fundamentals Out – Semantics In.

One Pound

The pound moved higher against the softer dollar on Friday after lacklustre U.S. economic reports and cautious remarks on interest rates by Federal Reserve Chair Janet Yellen. Cable was up 0.29% to 1.4893 in late trade. Sterling received a boost after Bank of England Governor Mark Carney said the next move in interest rates is going to be up. The remarks came during a panel discussion at a Bundesbank conference in Frankfurt. The market is likely to remain in consolidation mode ahead of key economic data, UK consumer credit and mortgage approvals are both set for release at 09:30 this morning.

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The euro fell, halting a two-week rally against the dollar, as Greece’s funding concerns and the European Central Bank’s aggressive monetary easing contrasted with the markets perceived Federal Reserve’s path toward higher interest rates. The shared currency has slid against 14 of its 16 major peers  this year as the ECB carries out an unprecedented plan to print 1.1 trillion euros of bonds to support the economy and stave off deflation. Speculators placed record bets on declines in the euro with the currency dropping for a record ninth month as Greece strives to persuade creditors to accept proposed reforms and release further aid. Greece’s Prime Minister Alexis Tsipras will update lawmakers today on talks held over the weekend in Brussels between Greek government officials and representatives of the country’s creditors to secure more funds from the euro area and stave off fiscal collapse.

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The dollar has inched higher versus both the yen and euro in today’s Asian trading sessions,  after the head of the U.S. Federal Reserve underscored the view that the Fed is likely to start raising interest rates gradually later this year. The dollar edged up 0.1 percent to 119.24 yen. It has fallen more than 2 percent from a near eight-year peak of 122.04 set early this month. In a highly anticipated speech on Friday, Fed Chair Janet Yellen outlined the case for a ‘gradualist approach’ to rate hikes, in comments mirroring those at the post-FOMC meeting on March 18. She said policy tightening could “speed up, slow down, pause, or even reverse course” depending on actual and expected developments in the economy. Yellen went to great length to detail why rate hikes would not be rushed and ultimately may not reach levels previously considered to be ‘normal.” The diverging interest rate pathways between the Fed and most of the developed world means that traders of the dollar should in general continue to support the greenback. The key event for the dollar this week is the U.S. jobs report which will be issued on Friday.

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