As geopolitical tensions between the East and West rise, sanctions and souring relations could have lasting impacts on business globally.
- Euro trends lower ahead of ECB policy announcement
- Positive BoE commentary may offer pound boost
- Trade worries set to weigh on US dollar
Dovish ECB bias to drive further euro selling
Demand for the euro could weaken further today as markets react to the European Central Bank’s (ECB) June policy decision.
Although no change in interest rates or monetary policy is expected at this stage EUR exchange rates are vulnerable to any fresh indications of dovishness from policymakers.
If the ECB appears to be shifting towards the prospect of cutting interest rates before the end of the year this could weigh heavily on the euro.
On the other hand, any expression of confidence in the outlook of the Eurozone economy may offer a temporary boost to the single currency.
Signs of BoE optimism may benefit pound
Confidence in the pound could pick up this morning on the back of comments from Bank of England (BoE) Governor Mark Carney.
After the UK services PMI showed a modest uptick in May, averting a contraction for the composite PMI, the downside potential of GBP exchange rates has eased.
While the BoE is unlikely to raise interest rates in the months ahead, thanks to the ongoing uncertainty of Brexit, any hawkish comments from Carney could boost the pound.
Any indication that Carney and the Monetary Policy Committee (MPC) are taking a less optimistic outlook, however, may see GBP exchange rates falter.
Widening trade deficit set to exacerbate US dollar weakness
An unexpectedly sharp slowdown in private sector job creation saw the US dollar fall further out of favour yesterday.
With markets increasingly betting on the prospect of the Federal Reserve cutting interest rates before the end of the year, possibly even twice, the strength of USD exchange rates has faded.
Further losses could be in store for the US dollar this afternoon if the latest US trade balance shows a widening of the deficit.
Any fresh evidence that the US-China trade dispute is damaging the US economy may give investors additional incentive to sell out of the US dollar.
Thursday, 6th June 2019
10:00 GBP Bank of England Governor Mark Carney Speaks
12:45 EUR European Central Bank Rate Decision
13:30 USD Trade Balance