In his weekly column for FX-MM, Natixis’ Senior Forex Analyst, Nordine Naam, reflects on key currency movements during the second quarter of 2017. In response to an improvement in US macroeconomic indicators, the US dollar is expected to firm further with stable growth and inflation remaining low at 2.21%.
Meanwhile, the sterling recovered against the euro and US dollar, registering at 0.4% above its growth estimate despite last week’s stalemate over Brexit negotiations. Although little progress was made last week regarding the terms of Britain’s exit, the sterling drew strength from statements by Michael Saunders, member of the Monetary Policy Committee (MPC), urging for a tightening of policy to contain inflation.
Elsewhere, the sharp appreciation of euro has raised concerns on the indirect effects on European inflation and growth. However, any correction of the EUR/USD is expected to be limited given uncertainties over the US debt ceiling and hurricane Harvey’s negative impact on growth.
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