As geopolitical tensions between the East and West rise, sanctions and souring relations could have lasting impacts on business globally.
- Pound exposed to downside pressure if inflation eases
- Eurozone industrial production contraction to dent euro
- Softening US inflation to encourage Fed caution
Weaker UK inflation to increase pressure on pound
Demand for the pound could diminish further this morning if January’s UK consumer price index data eases as forecast.
The headline inflation rate is expected to dip from 2.1% to 2.0% on the year, hitting the Bank of England’s (BoE) inflation target.
This would give BoE policymakers additional incentive to leave interest rates on hold for longer, reducing the upside potential of GBP exchange rates.
If inflationary pressure weakens further than forecast this could see the pound slump sharply against its rivals.
Euro vulnerable to Eurozone industrial production decline
Confidence in the outlook of the Eurozone economy is unlikely to improve on the back of December’s Eurozone industrial production data.
Forecasts point towards another sharp contraction in production on the year, highlighting the continued weakness of the sector.
As long as the Eurozone economy continues to show signs of a sustained slowdown the mood towards the euro is likely to prove negative.
Unless production shows a significant rebound on the month EUR exchange rates look set to extend their downtrend today.
Easing inflation to limit US dollar upside
The diminished risk of another US government shutdown helped to support USD exchange rates yesterday.
However, demand for the US dollar could diminish over the course of the day as investors brace for the latest US consumer price index data.
If the inflation rate eases as expected this would give Federal Reserve policymakers greater incentive to avoid returning to a monetary tightening bias.
Speculation over trade relations between the US and China may also prompt volatility for the US dollar.
Wednesday, 13th February 2019
09:30 GBP Consumer Price Index
10:00 EUR Eurozone Industrial Production
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)