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Could fresh ECB dovishness drive euro lower?

business-articlesCould fresh ECB dovishness drive euro lower?
  • Signs of ECB dovishness could dent euro
  • Pound looks for support on UK retail sales
  • Narrowed trade deficit to benefit US dollar
 
 
Euro vulnerable ahead of ECB commentary
 
After the decline seen in yesterday’s German and French consumer confidence indexes the euro could struggle to return to a positive footing today.
 
EUR exchange rates remain sensitive to commentary from the European Central Bank (ECB), with a number of policymakers scheduled to speak this morning.
 
Fresh signs of dovishness from the ECB would leave the euro exposed to fresh selling pressure, even now that the odds of a 2019 interest rate hike have already faded.
 
However, if policymakers adopt a more optimistic outlook this could encourage the single currency to push higher against its rivals.
 
 
Rising UK retail sales may offer pound rallying point
 
Even in the face of ongoing uncertainty over Brexit the pound could find a rallying point this morning.
 
Forecasts point towards a solid improvement in the latest CBI reported retail sales index, which is set to strengthen from 0 to 5 on the month.
 
Evidence that UK consumers are continuing to shrug off Brexit-based anxiety and still spending could improve confidence in the outlook of the UK economy.
 
Another underwhelming reading, on the other hand, could put additional pressure on the pound.
 
 
Narrowed trade deficit to boost US dollar
 
With investors expecting to see the US trade deficit narrow the US dollar may find a rallying point this afternoon.
 
Even though global trade tensions are not likely to ease in the near future, with the US and China still at odds, any narrowing of the deficit could bolster USD exchange rates.
 
Improved trade conditions would go some way towards easing market anxiety over the prospect of a potential US recession, limiting the downside pressure on the US dollar.
 
However, if the deficit is found to have widened in January this would give investors fresh incentive to pile out of the US dollar today.
 
 
Upcoming Data:
 
Wednesday, 27th March 2019
11:00 GBP CBI Reported Retail Sales
12:30 USD Trade Balance
19:30 GBP Parliamentary Brexit Vote
 
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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