Yet another ‘buy the rumour, sell the fact’ move for GBP. The Monetary Policy Committee gave a more neutral assessment of the UK economy than expected and revised their long term inflation forecasts lower. The market was long GBP going into the statement and profit taking drove GBPUSD down 200 pips on the day.

Another day of bloodletting in sterling as large short term positions catalysed an overreaction to a moderate outlook from the Monetary Policy Committee. GBP ended the day as the only major to be lower against the USD, and closed almost 2.5 per cent lower against AUD following strong Australian data from the previous night.

USD

With the very strong ADP National Employment Report this week, market participants will be looking to see if Payroll data also outperforms. After a hard couple of days, Thursday saw the dollar rebound on what was a relatively quiet day for the new US administration.

Whether it was the twitter silence or the long USD, position in the market finally looking more balanced, the USD rallied from lows across the board. A strong Payrolls print could test many pairs which are at technically important levels, GBPUSD, EURUSD and USDJPY all have potential to reverse the moves of the last two weeks.

EUR

This week the Financial Times quoted American President Trump’s advisers of GERMANY USING `GROSSLY UNDERVALUED’ EURO. The Euro spiked 50 pips on this news, showing markets are going to have to get used to short term market moves driven by political comments going forward.

In what looks like a break from ranks, Ewald Nowotny, president of the National Bank of Austria and member of the European Central Bank governing council,  says “ECB certainly won’t discuss tapering in March” and “will discuss policy in June but there won’t be a tapering decision”. He also said that “tapering would come first, rate changes only at a later point” – Reuters

The ECB Council Member also said “We can’t just react to one country” – Wall St Journal. It seems clear these comments have been made to rebuff any comments already made, or as yet unspoken, from German officials about the need to consider normalizing policy (starting to reduce the bond purchase programme and consider raising rates) as soon as possible. As inflation rears its head in Germany faster than the rest of the continent, central bankers and finance officials have started speaking out against the ECB. IG Metall Union last week demanded a 4.5 per cent wage increase for steelworkers as they also see price pressures build. EUR dropped on the news from 1.0690 to a low of 1.0625 before rallying back to close unchanged against the USD and almost 200 pips better against GBP (GBPEUR).