Increased anxiety over Brexit and the UK’s future trade outlook weighed heavily on the pound yesterday, with a potential US-UK trade deal remaining a distant prospect.
- Pound rises as Johnson takes lead in Conservative leadership contest
- Rising jobless claims weigh on US dollar
- Euro struggles as industrial production continues to contract
Anxiety over no-deal Brexit limits pound appeal
As Boris Johnson took the lead in the first round of voting of the Conservative leadership contest the appeal of the pound rose, even though some traders were worried over the prospect of a no-deal Brexit.
GBP exchange rates could find a rallying point this afternoon, however, if Bank of England (BoE) Governor Mark Carney adopts an optimistic tone in his latest public comments.
Evidence that the BoE remains on course to raise interest rates before the end of the year could help to shore up the pound.
On the other hand, increased signs of caution over the economic outlook may drive GBP exchange rates to shed fresh ground ahead of the weekend.
Stronger retail sales set to boost US dollar
A disappointing uptick in initial and continuing jobless claims left the US dollar on a weaker footing yesterday, adding to bets that the labour market is struggling to tighten further.
With an imminent Federal Reserve interest rate cut appearing a near-certainty according to market odds, the upside potential of USD exchange rates seems limited.
Even so, the mood towards the US dollar could improve this afternoon on the back of May’s advance retail sales figures.
A modest rebound in sales after April’s -0.2% contraction would give investors cause for confidence in the US outlook, indicating that consumers are shrugging off the impact of ongoing trade tensions.
Euro weakens ahead of Italian inflation data
A smaller-than-expected contraction in Eurozone industrial production in April was not enough to shore up EUR exchange rates yesterday.
As the impact of global trade anxiety continued to weigh on industrial output this dampened the outlook of the Eurozone economy as a whole.
May’s finalised Italian inflation data is expected to confirm that price pressures continued to ease, reflecting the general easing in inflation across the currency union.
With markets already largely expecting the European Central Bank (ECB) to maintain a dovish policy bias in the months ahead another weak inflation reading is likely to keep the euro on the back foot.
Friday, 14th June 2019
10:00 EUR Italian Inflation Rate
13:30 USD Advance Retail Sales
13:55 GBP Bank of England Governor Mark Carney Speaks