Daily Market Report 25/08/16

GBP

Sterling extended gains to hit a three-week high yesterday, as speculators further cut bets against the currency after recent data indicated that the economy was holding up surprisingly well after the Brexit vote. Short positions on sterling had reached a record high of 94,238 contracts in the week to Aug. 16 and traders said many speculators were now unwinding bets and booking profits.

The central bank cut rates to a record low this month and restarted an asset-buying programme to cushion the economy from an expected post-Brexit slowdown. But after a slew of upbeat data, investors are reassessing the chances of further easing.
 

USD

The dollar crept up on Wednesday after falling the previous day but was unable to break out of recent trading ranges, as investors eyed a meeting of central bankers on Friday for clues on when the U.S. Federal Reserve will hike interest rates again.

Policymakers from across the globe will gather in the U.S. mountain resort of Jackson Hole at the end of the week, where the focus firmly placed on a speech by Fed Chair Janet Yellen. Yellen is widely expected provide some forward guidance on when the Fed will follow up last December's rate hike - the first in almost ten years. Futures markets assign a roughly one-in-five chance the hike will come in September and 50-50 odds by the end of the year, according to CME FedWatch.

A raft of U.S. housing data due later in the day was not seen as likely to move the dollar much ahead of the all-important Jackson Hole meeting. Data on Tuesday that showed new U.S. single-family home sales unexpectedly rose in July, reaching their highest level in nearly nine years, had helped the dollar marginally, strategists said.

Recent hawkish comments from Fed Vice Chairman Stanley Fischer and New York Fed President William Dudley have raised some investors' expectations that Yellen might shift to a less cautious stance.
 

Key Announcements

09.00 – EUR : German IFO Business Climate; forecast at 108.5 against a previous of 108.3

13.30 – USD : Core Durable Goods Orders M/M; forecast at 0.4% against a previous of -0.4%

13.30 – USD : Unemployment Claims; forecast at 265k against a previous of 262k