A renewed sense of political anxiety gripped the pound ahead of the weekend as the Conservative leadership contest came down to its final two candidates.
- Euro on back foot after sharp drop in investor confidence
- Political jitters to encourage pound volatility
- US dollar braces for inflation data
Dovish Draghi comments may weigh on euro
A surprise slump in the Eurozone Sentix investor confidence index weighed on the euro yesterday, highlighting the economy’s continued vulnerable to deteriorating global trade conditions.
With the US already threatening to impose further tariffs on Chinese imports confidence in the outlook of the trade-sensitive Eurozone economy naturally diminished.
EUR exchange rates could lose further ground this morning if European Central Bank (ECB) President Mario Draghi maintains a dovish tone in his latest public comments.
Fresh evidence that the ECB is shifting towards a monetary loosening bias would weigh heavily on the euro.
Pound vulnerable as Conservative leadership race heats up
The Conservative leadership contest looks set to dominate the outlook of the pound today, given an absence of fresh UK data.
Although divisions over the Brexit deadline have already emerged between candidates investors may still struggle to find cause for confidence in the near term.
Unless support appears to swing towards a more moderate candidate, diminishing the odds of a no-deal Brexit, demand for the pound could prove limited.
As long as a hard-line Brexiteer remains the odds-on favourite to succeed Theresa May GBP exchange rates are likely to see limited gains.
Weaker inflation may slash Fed rate cut odds
An unexpectedly improved NFIB small business optimism index offered the US dollar a boost yesterday, encouraging greater confidence in the resilience of the US economy.
This uptick was not enough to diminish bets that the Federal Reserve will cut interest rates in the near future, especially as the Trump administration continued to push for looser monetary policy.
If this afternoon’s consumer price index eases as forecast this is likely to decrease the case for a Fed interest rate hike, even though the CPI is not the central bank’s preferred measure of inflation.
On the other hand, evidence that inflationary pressure picked up in May could spur on the Fed and encourage the US dollar to gain further ground.
Wednesday, 12th June 2019
09:15 EUR European Central Bank President Mario Draghi Speaks
13:30 USD Consumer Price Index
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)