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Pound braces for lacklustre UK inflation figures

business-articlesPound braces for lacklustre UK inflation figures
  • Pound recovers ground ahead of UK inflation report
  • Signs of ECB optimism fail to benefit euro
  • Weakening small business optimism weighs on US dollar
Further pound losses forecast on UK inflation data
As the initial impact of the recent dovish comments from Bank of England (BoE) policymakers faded this encouraged GBP exchange rates to recover some of their lost ground.
Sterling was also supported by some optimistic Brexit comments from Boris Johnson.
However, further weakness could be in store for the pound this morning with the release of December’s UK consumer price index.
Unless inflationary pressure shows signs of picking up at the end of 2019 the odds of an imminent BoE interest rate cut will remain elevated, weakening the pound.
Slowing German growth set to drag euro lower
Comments from European Central Bank (ECB) board member Yves Mersch failed to offer the euro any particular encouragement yesterday.
Although Mersch noted that the Eurozone economy is showing ‘good signs of stabilisation’ this was not enough to encourage hopes that the central bank will shift from its current policy bias.
Confidence in the health of the currency union may receive a fresh blow this morning if German gross domestic product confirms a sharp loss of momentum on the year.
Fresh evidence of a slowdown within the Eurozone’s powerhouse economy would give policymakers renewed cause for caution, limiting the appeal of the euro.
US dollar vulnerable to signs of manufacturing weakness
Worries over the outlook of the US economy picked up yesterday thanks to a weaker-than-expected NFIB small business optimism index reading.
With confidence showing fresh signs of deterioration in December investors saw little incentive to favour the US dollar, in spite of a stronger consumer price index reading.
Any signs of a slowdown in January’s Empire State manufacturing index could keep the US dollar on the back foot today.
As long as the US economy continues to show evidence of slowing, the potential for USD exchange rate gains may prove limited.
Upcoming Data:
Wednesday, 15th January 2020
09:00 EUR Germany Full Year Gross Domestic Product
09:30 GBP Consumer Price Index
13:30 USD Empire State Manufacturing Index
Philip McHugh

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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