Global Themes

Risk aversion has been the main theme in financial markets this week with market participants eagerly awaiting the decision from Lawmakers in the U.S. regarding Healthcare reforms.  With rhetoric from global data sources suggesting there may be insufficient support to repeal and replace Obamacare, failure today will give further doubt over the new Administration’s ability to deliver on guarantees of tax reform and increased funding in infrastructure.

GBP

With Britain bracing to trigger Article 50 next week, sterling has come under pressure on Friday against the dollar.  Having reached one month highs above $1.25, it failed to maintain further momentum as the uncertainty of the negotiations loom.  Despite strong inflation and retail sales data from the U.K. an expectation the Bank of England may support higher interest rates later in the year has been thwarted by market pundits who suggest the cloud of uncertainty from BREXIT negotiations could de-rail monetary policy changes in 2017.

EUR

Data released today would suggest the Eurozone economy is no longer on the defensive.  The Purchasing Managers’ Index (PMI) for March reached a six year high with a reading of 56.7, up from 56.0 in February, with data from France and Germany also suggesting first quarter growth will be seen from the Eurozone’s largest economies. This substantial growth will more than likely place pressure on the European Central Bank (ECB) to review its current monetary policy of low interest rates and asset buying.

AUD

With uncertainty over Healthcare reforms in the U.S. clouding the world economy, the Australian dollar has suffered, sitting at one-week lows on Friday.  Failure today is likely to signal delays with fiscal reforms causing traders to continue reversing their carry trade positions on the higher yielding Aussie currency.

USD

Attention is well and truly on Washington today with the dollar being held hostage to political uncertainty.  Healthcare reform is the first major agenda item for the president and accelerated losses for the dollar could be seen if today marks the first major failure to repeal and replace Obamacare.  For dollar strength to continue, markets require confidence that the broader agenda laid out by the new Administration will be achievable.

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