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Crash in German confidence drives euro lower

business-articlesCrash in German confidence drives euro lower
  • Pound stumbles as unemployment picks up
  • Weak German sentiment fuels euro losses
  • US dollar steady as US-China trade tensions show signs of easing
 
Will UK inflation push the pound lower?
 
An eleven-year high in UK wage growth was not enough to shore up the pound yesterday as June’s unemployment rate climbed unexpectedly.
 
The mood towards the pound could sour further this morning with the release of the latest UK consumer price index report.
 
With forecasts pointing towards the headline inflation rate easing from 2.0% to 1.9% GBP exchange rates look vulnerable to renewed selling pressure.
 
As any decline in inflation would give the Bank of England (BoE) greater incentive to loosen monetary policy a weaker reading here could see the pound sink across the board.
 
 
Euro vulnerable to weakening Eurozone growth
 
The euro looks set to remain on a bearish footing after a sharp decline in the German ZEW economic sentiment index.
 
With the Eurozone’s powerhouse economy appearing at increasing risk of a recession the appeal of the single currency naturally declined.
 
As no change is expected from the second estimate of second quarter Eurozone gross domestic product the potential for a euro recover appears limited today.
 
Any indication that the Eurozone economy is moving closer to a state of contraction could encourage further weakness in EUR exchange rates.
 
 
Signs of trade weakness set to dent US dollar
 
While the Trump administration’s decision to delay fresh tariffs on Chinese products increased risk appetite the US dollar was able to largely shrug this off.
 
Worries over the trade outlook could pick back up this afternoon, however, if July’s import and export price indexes show another month of contraction.
 
Evidence that trade tensions have continued to weigh on the growth of the US economy may prompt a bout of US dollar selling.
 
 
Upcoming Data:
 
Wednesday, 14th August 2019
09:30 GBP Consumer Price Index
10:00 EUR Eurozone Gross Domestic Product
13:30 USD Import Price Index
13:30 USD Export Price Index
 
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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