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- Post-Brexit trade anxiety limits pound appeal
- Euro trends lower ahead of ZEW economic sentiment survey
- Stronger manufacturing index fails to shore up US dollar
Stronger wage growth forecast to boost pound
Increased anxiety over Brexit and the UK’s future trade outlook weighed heavily on the pound yesterday, with a potential US-UK trade deal remaining a distant prospect.
Even so, GBP exchange rates could return to a positive footing this morning if May’s UK earnings data proves encouraging.
Forecasts point towards weekly earnings excluding bonuses picking up 3.5% on the year in the three months to May, suggesting that domestic wage growth remains strong.
As long as wages continue to outpace inflation in the near future this should limit the potential for a Bank of England (BoE) interest rate cut, to the benefit of the pound.
Euro vulnerable to deteriorating economic sentiment
After a lacklustre performance in June investors are anticipating another month of contraction from the latest ZEW economic sentiment surveys.
Investors expect to see confirmation that confidence within the German economy continued to decline at the start of the third quarter.
Fresh evidence of weakening sentiment would leave the euro exposed to another bout of selling pressure given existing worries over the economic outlook.
Unless confidence shows signs of picking up the mood towards the single currency looks set to sour further today.
Underwhelming retail sales set to dent US dollar
A better-than-expected Empire manufacturing index failed to shore up the US dollar on Monday, even as the index bounced back from -8.6 to 4.3.
While this improvement suggests that the manufacturing sector is shaking off the impact of the ongoing trade dispute with China, the threat of fresh tariffs limited the strength of USD exchange rates.
The US dollar could fall further out of favour this afternoon if the latest advance retail sales data weakens as forecast.
With sales expected to show growth of just 0.1% on the month this could ignite renewed concerns over the wider economic outlook, leaving the US dollar on the back foot.
Tuesday, 16th July 2019
09:30 GBP Weekly Earnings ex Bonus
10:00 EUR German ZEW Economic Sentiment Survey
13:30 USD Advance Retail Sales
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)