Pound Traders Eye EU Meeting On Brexit Today

The US dollar has bounced around over the last few days, but made no real headway and is trading at 96.76 easing a bit in the morning session after a variety of better than expected economic reports over the last few days. The economics calendar is bear in the Asian session on Friday but perks up later in the day.  Amid hopes that the U.S. Federal Reserve will slow down its pace of raising interest rates due to recent volatility in global financial markets, foreign investors are expected to move more funds into the region to push the regional currencies even higher, dealers said, adding that the local central bank’s intervention is likely to continue.

The U.S. currency’s fate has been pared with oil and stocks in recent weeks. Weaker oil prices and turbulent financial markets suggest the Federal Reserve could hold off raising interest rates in 2016, contrary to what was telegraphed in December.

Daniel Katrine, head of FX strategy at BNP Paribas believes that any rebound in the dollar as a result of an improvement in risk sentiment would not likely persist. He added an improvement in risk appetite seen for the most part this week was due largely to “the collapse in market pricing for further Fed hikes and also reflects reduced pricing for Chinese yuan devaluation, as the dollar has retreated.”

“For this reason, we do not expect the markets to rebuild Fed rate hike expectations, and front-end rates are likely to stay low.”

The dollar fell 0.8 percent on Friday against the yen to 113.18 yen. Analysts said central bank policies are also a factor in this currency pair. The yen is trading at 112.94 giving back 32 points in the morning session.

Against the US dollar the euro is trading at 1.1123 up by 16 points on Friday morning as traders continue to react to the ECB monetary policy minutes released yesterday.  The euro fell on Thursday to a two-week low against the dollar after minutes from the ECB’s January meeting gave further hints that the central bank may ease its monetary policy in March.

An account of the January 20-21 meeting showed the ECB’s Governing Council was “unanimous” in concluding that the already aggressive policy stance “needed to be reviewed and possibly reconsidered” at its next meeting. “In a situation where risks were predominantly on the downside and new downside risks were emerging, it would be preferable to act pre-emptively, taking emerging risks into account, rather than to wait after risks had fully materialized,” the account said. The euro was 0.3 per cent weaker on the day at $1.1096 following the publication of the minutes.

Today’s big event will be the outcome of the EU meeting on the UK membership in the Eurozone. Today’s decision could decide the fate of the UK’s membership ahead of the referendum. The pound is trading at 1.46324 down 24 points. David Cameron calls on EU leaders to help him settle the question of Europe for a generation by agreeing a “credible” deal he can sell to the British public and stay in the European Union. The news is not overwhelmingly encouraging for Mr Cameron, even if it is not disastrous either, Peter Foster writes.

Donald Tusk, the president of the European Council, hinted that on the big issues there remained considerable distance between all sides.

In fact, he sounded faintly disconsolate when he said at a brief late-night press conference that only “some progress” had been made and “a lot more remains to be done”.