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Imminent Conservative leadership contest weighs on pound

By Philip McHugh on May 17, 2019

Pound stumbles as Conservatives gear up for leadership contest
Weakening Eurozone construction output to drag on euro
US dollar strengthens as US-China trade spat deepens

Pound remains under pressure amid political jitters

Political anxiety weighed heavily on the pound yesterday as Theresa May agreed to set a departure date after MPs vote on her withdrawal agreement for the fourth time.

With the Conservative party increasingly gearing up for a leadership contest confidence in the pound naturally diminished.

As Parliament looks set to vote down May’s bill once again in June markets remain frustrated by the lack of tangible progress towards a final deal.

As long as investors see no signs of a compromise between the Conservative and Labour leaderships GBP exchange rates look set to remain on the back foot.

Slowing construction output to weigh on euro

Yesterday’s widened Eurozone trade surplus failed to offer the euro any significant boost against its rivals, given the latest increase in global trade tensions.

EUR exchange rates could lose further support this morning on the back of March’s Eurozone construction outlook data, with forecasts pointing towards a slowdown on the year.

Any signs of weakness within the construction sector could weigh heavily on demand for the single currency ahead of the weekend.

A downward revision to April’s finalised Eurozone consumer price index could also limit the strength of the euro today.

US dollar benefits from global trade anxiety

Global trade tensions continued to fuel demand for the US dollar on Thursday, benefitting from news that the US had blacklisted Chinese telecoms provider Huawei.

While concerns remain over the potential negative repercussions the US economy could face as a result of this latest souring in relations with China this was not enough to weigh down USD exchange rates.

The US dollar could gain further ground this afternoon if May’s University of Michigan consumer sentiment index picks up as forecast.

Evidence of continued resilience among US consumers, even in the face of continued trade tensions, may give USD exchange rates an additional leg up ahead of the weekend.

Upcoming Data:

Friday, 17^th May 2019
10:00 EUR Eurozone Construction Output
15:00 USD University of Michigan Consumer Sentiment Index

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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