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Can US dollar recover today following lacklustre inflation data?

business-articlesCan US dollar recover today following lacklustre inflation data?
  • Euro benefits after ECB affirms commitment to end of quantitative easing programme
  • BoE policy meeting fails to offer any surprises
  • US dollar softens after inflation dip
 
Euro vulnerable to weaker Eurozone trade figures
 
The European Central Bank’s (ECB) commitment to end its long-running quantitative easing programme in December boosted the euro yesterday, in spite of downgraded growth forecasts.
 
EUR exchange rates could build on this momentum this morning if July’s Eurozone trade balance data proves positive.
 
However, after the recent slowdown in German and Eurozone trade and production data the trade balance looks biased to the downside.
 
A narrowing of the trade surplus may leave the single currency on a weaker trend heading into the weekend, highlighting the Eurozone’s continued vulnerability to global trade tensions.
 
 
Pound braces for volatility on BoE governor comments
 
While the Bank of England’s (BoE) September policy meeting proved to be something of a non-event the pound could still see volatility on the back of comments from Governor Mark Carney today.
 
If Carney maintains a less optimistic tone on the domestic outlook, adding any more warnings over the risks of a no-deal Brexit, this could weigh heavily on GBP exchange rates.
 
On the other hand, Carney may fail to offer any fresh insights on monetary policy or the UK economy, leaving the pound without any particular momentum.
 
As long as tensions within the Conservative Party remain heightened over the subject of Brexit the potential for GBP gains looks limited.
 
 
Will softening retail sales extend USD losses?
 
After the headline US inflation rate fell short of forecasts on Thursday USD exchange rates will be looking for a rallying point this afternoon.
 
However, forecasts point towards a modest slowing in advance retail sales on the month in August.
 
If the US economy demonstrates fresh signs of weakness the mood towards the US dollar could deteriorate further, giving investors incentive to favour higher-yielding assets.
 
Any upside surprise, though, may improve confidence in the economic outlook and return USD exchange rates to a bullish trend heading into next week.
 
 
Upcoming Data
 
Friday, 14th September 2018

10:00 EUR Eurozone Trade Balance
11:00 GBP Bank of England Governor Carney Speech
13:30 USD Advance Retail Sales
Philip McHugh

Philip McHugh

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)

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