The pound is currently reacting to the UK GDP release which met expectations. Initial estimates released showed the UK economy grew by 0.5 per cent in Q4, up a tick from the previous quarter’s 0.4 per cent growth. The interest rate decision in South Africa was closely watched as investors looked to see how African economies are reacting to some extreme currency weakness. Japan had a policy decision which may impact the yen. Having seen the GBP/JPY rate fall from 188 towards 160 over the past two months, a number of market orders will probably be clustered around the 168-170 price mark as importers target a potential spike in the Yen rate overnight.

USD

The Federal Reserve, as expected, turned a little more cautious about raising interest rates again in the US. The Fed announced no changes to its 0.5 per cent benchmark rate, which it raised from 0.25 per cent back in December. The Fed statement reintroduced worries about financial market turbulence (stocks, oil) and slow economic growth abroad (China, Brazil). The statement ‘suggested’ the Fed was unlikely to raise rates in March 2016. The EUR/USD rate saw little reaction to the USD-negative news, with the euro’s ability to rise back towards the $1.10-$1.11 range hampered by the ECB’s strong hints about more future monetary easing.

GBP

The pound fell against both the US dollar (-0.8per cent) and the euro (-1per cent) after a fresh opinion poll on Britain’s EU Referendum suggested that 41 per cent of British people want to stay in EU but 41 per cent want to leave EU. Over the next seven days, focus for GBP should centre much more on the health of the UK economy and the outlook for interest rates. UK Q4 GDP estimates will be released ahead of next Thursday’s key Bank of England quarterly inflation report. The GBP/USD is still trading just one per cent away from recent six-year lows near the $1.40 mark. The GBP/EUR rate is trading 1.2 per cent above one-year lows.

EUR

The EUR/USD rate has fluctuated in a surprisingly narrow price range of $1.0984 to $1.0711 this month. This is despite ECB president Mario Draghi talking of chances of more QE last week and German bond yields, an indication of interest rates, falling towards record lows. The euro has however benefitted from risk aversion connected to China and Oil prices, and appreciated to €1.2888 against the pound on January 20 – the euro’s strongest level in a year. The US rate decision was a major trading point for the single currency before the eurozone inflation data. Expectations surprisingly suggest the euro may be well positioned for a rally.