The euro accelerates before a rate hike in 2019 and the pound, underpinned by the Brexit

The euro ACCELERATES before a rate hike in 2019 and the pound, underpinned by the Brexit

The dollar lost ground to rivals on the eve of the meeting of the Federal Reserve (Fed).

The yen against the dollar back.

In full week of the Fed, just a fact could steal the attention of operators: the European Central Bank (ECB) is off – hook with some information that would reduce expectations that the divergent paths of both central banks increases. And just that happened. The ECB leaked report pointing to a rise in interest rates in 2019 has fueled the euro, which has rebounded above $ 1.23, to $ 1.2350.

Community currency had started the week depressed and reached a two-week low at $ 1.2258. The ‘Greenback’, meanwhile, remained well supported against all rivals, after the good macroeconomic data released late last week in the US will encourage its operational and in anticipation of the market that the Federal Reserve US expands its forecast increases in interest rates at its March meeting, which ends Wednesday. But two facts changed things.

First, the aforementioned report. As reported in Reuters, the European Central Bank would end bond purchases this year to undertake the first rate hike in the middle of next year. Explains the means board members of the central bank have already begun to change the focus of their discussions in this regard. It also ensures they are comfortable with the forecast rate increase in mid-2019, although discussions are focused on the pace of increases after the first climb, given the slow rise in inflation.

This information, however, disagree with the tone of ECB members did their best to express their concerns about the lack of inflationary pressures and the need for patience. “This suggests that it is not likely to change their minds before the summer, although many members believe the central bank bond purchases should be finished next year,” the founder of BK Asset Management, Kathy Lien. “This week in particular, the data should reinforce the ECB’s caution with the ZEW and PMI survey will collapse from its recent highs,” adds the expert.


Second, the pound has broken the short term range in which it was encapsulated against the dollar, reaching up Monday a month at $ 1.4088. The British currency maintains its good form on Tuesday and continue shopping after the news that the UK and the European Union have reached an agreement for a transition period for Brexit 21 months. It has also transpired which is considering a potential solution to the flashpoint on the border with Northern Ireland.

The transition period will run from 29 March 2019 until the end of December 2020. During this time, EU citizens who are in British territory maintain their rights. The United Kingdom may also negotiate and sign trade agreements outside the EU during this period.


The rise of the euro and pound have affected the index that measures the performance of the greenback against six rivals, which has fallen below 90.00 points, to 89.95 points. Instead, it has managed to rebound against the yen to 106.50 yen from the 105.77 yen the previous session.

Japan’s currency had been boosted because the political scandal hanging over Prime Minister Shinzo Abe, could force him to abandon his re-election for a new term, which threatens the ‘Abenomics’.

A recent survey by Nippon TV has revealed that support for the Prime Minister has plummeted 14 points to 30%, the lowest level Abe popularity in the last five years. His involvement in a case of treatment of favors and nepotism in a sale of government land, which has also been embroiled his wife and Japanese Finance Minister, Taro Aso, has questioned his leadership of the Liberal Democratic Party and the country.

Analysts no longer question his re-election only, but a resignation from office, an event that will trigger the yen, also arise since the currency has been hampered by its ultra-expansionary monetary policy. “Political risk in Japan will be an event weight in the markets, because it endangers the ‘Abenomics'”, warn experts from Barclays.

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