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By xemarketanalysis September 18, 2017 2:16 pm
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    XE Market Analysis: British Pound Slips as Governor Warns of "Considerable Risks"


    • Majority of FX relatively quiet ahead of the FOMC meeting.
    • GBP under pressure after the best week in years.
    • US stocks hit fresh highs and safe-haven Yen under pressure as risk sentiment improves.
    • Eurozone CPI confirmed at 1.5% in August.


    The British Pound saw its rally brought to a halt as traders took profit from the currency's 3% rally last week, with most of its gains coming on Thursday and Friday of last week. In a speech today, BoE Governor Carney warned of "considerable risks to the UK outlook", putting Sterling under additional pressure as Carney has been known to signal impending rate increases, only to backtrack due to concerns over the economy.


    The US Dollar is fairly flat overall as the market waits for Wednesday's FOMC meeting to hear the details of their balance sheet reduction, in particular on how US policymakers will alter their rate rise path projections for the remainder of this year and into next year. The market is only pricing in one rate hike over the next year, whereas the last "dot-plot" showed policymakers were planning three. A more confident Fed than some of the recent policymaker’s comments on softer inflation would be expected to strengthen the Dollar.


    The Pound has begun the week giving back some of its gains (see highlight). The key highlights this week will be retail sales for August, and PM Theresa May's big Brexit speech in Florence on Friday.


    The Euro remains steady above 1.19 versus the Dollar, with August CPI data in line with market forecasts of 1.5%, though the core rate held steady at 1.3% (expected 1.2%). The recent lack of progress in the Euro above 1.20 is naturally causing a drop-off in expectations and positioning for the currency, potentially limiting its upside in the short-term. Tomorrow we have the German ZEW for September, and then the September flash estimate PMIs on Friday that is forecast to remain at elevated levels pointing to continued strong growth across the bloc. 


    The Canadian Dollar is generally flat versus its US counterparts with higher oil prices did little to strengthen the Loonie that gained so much after the recent rate hike. This week it's the Fed who will be in focus and the driving force for USD/CAD.


    The Aussie Dollar continues to struggle to hold above the 80 cents level versus the US Dollar but remains supported by a rise in Australian government borrowing costs. 


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