Politics and economic divergences drving force - BBH

Analysts at Brown Brothers Harriman explained that in the foreign exchange market, sterling's slide is the main feature and offered the key events making the headlines so far.

Key Quotes:

"The flash eurozone PMI disappointed expectations.

The main driver of the investment climate is not so much the incremental economic data as the capital markets themselves.

The price action should not detract from the underlying signal, which is characterized by the divergence of economic and monetary policy among the high income countries.

If the Federal Reserve’s forecasts for four rate hikes for this year was exaggerated, so too is the market’s refusal to discount a single move fully.

While investors continue to make sense of the implications of negative interest rates, political issues are of rising concern.

Today’s bounce in EM supports our view that Friday's price action in EM FX was simply profit-taking ahead of the weekend, rather than the resumption of overall negative market sentiment."