Ahead of the Bank of England’s monetary policy decision on Thursday, the pound is little-changed at the time of this writing. The GBP/USD continues to hover around the 1.29 handle, while the EUR/GBP is down for the fourth day. The cross has nearly filled the gap that was left behind after the first round of the French election.
We have been surprised and wrong on emerging markets. We were expecting a breakdown in EM on the back of rising debt levels and a stronger U.S. dollar. Instead, EM stocks keep climbing along with other world equity markets. But just maybe we are there, i.e. time to get short?
With the Bank of England and European Central Bank slowly turning neutral, maybe it is time the market turned its attention to the Swiss franc again because the SNB is still pretty much dovish. Interest rates are unlikely to be raised anytime soon due to the lack of inflation in Switzerland. What’s more, the Swiss National Bank is still intervening in the forex markets as it firmly believes the franc remains overvalued.
The euro/U.S. dollar currency pair gained 0.777% during the week. The single currency is trading at 1.0987 after a period that was high on political risk with the French presidential elections entering their final stretch. The televised debate between the two candidates was an entertaining affair but failed to change the odds by much.
Despite the falls in buck-denominated gold, silver and copper prices, the U.S. dollar hasn't exactly been strong with the British pound/U.S. dollar (GBP/USD) currency pair and EUR/USD remaining bid throughout the week. But the dollar has performed much better elsewhere.