As geopolitical tensions between the East and West rise, sanctions and souring relations could have lasting impacts on business globally.
- Boris Johnson’s Brexit proposal fails to benefit pound
- Worries over Eurozone outlook limit euro demand
- US dollar shrugs off weaker labour market data
Disappointing service sector performance could fuel further pound losses
Reception to Boris Johnson’s ‘final Brexit offer’ proved rather lacklustre, keeping the pound on a generally weaker footing yesterday.
With Brexit talks appearing at risk of breaking down investors remain wary of the possibility of the UK crashing out of the EU without a deal or having to seek a fresh extension.
Confidence in the underlying health of the UK economy looks set to deteriorate further this morning as forecasts point towards another weak showing from the services PMI.
If the index falls into contraction territory, dipping below the neutral baseline of 50, it could trigger fresh pound losses.
Eurozone retail sales rebound set to boost euro
With the Eurozone economy continuing to show signs of a slowdown the appeal of the euro has softened in recent days.
However, EUR exchange rates may find a rallying point this morning as August’s Eurozone retail sales data is expected to show a solid rebound on the month.
Evidence of increased consumer spending could encourage the single currency to push higher across the board, even in the face of other signs of economic weakness.
Stronger domestic demand may help to offset the impact of the manufacturing sector’s sustained decline, easing fears of a potential third quarter Eurozone growth contraction.
US dollar vulnerable to signs of weakening economic activity
The US ADP employment change report fell short of forecasts yesterday, giving investors cause for caution ahead of Friday’s more influential US non-farm payrolls report.
Even so, the negative impact on the US dollar was ultimately limited thanks to a prevalent sense of market risk aversion.
USD exchange rates could face increased selling pressure this afternoon, though, if the ISM non-manufacturing composite index fails to impress.
After the underwhelming performance of the corresponding manufacturing data any signs of weakness here could weigh on USD exchange rates given existing worries over the health of the US economy.
Thursday, 3rd October 2019
09:30 GBP Services PMI
10:00 EUR Eurozone Retail Sales
15:00 USD ISM Non-Manufacturing 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)