As geopolitical tensions between the East and West rise, sanctions and souring relations could have lasting impacts on business globally.
- Lull in UK political developments encourages pound gains
- Euro fails to capitalise on ECB economic bulletin
- Underwhelming labour market signals weigh on US dollar
Easing Brexit anxiety unlikely to support Sterling for long
A temporary lull in political developments encouraged the pound to push higher ahead of the weekend, with the currency benefiting as market anxiety over Brexit eased.
However, as EU officials continued to express reservations over the ability to conclude necessary talks within the truncated transition period GBP exchange rates could struggle to hold onto this positivity for long.
As long as the risk of a December 2020 cliff-edge Brexit hangs over the economic outlook, support for the pound looks set to remain generally muted.
Anticipation ahead of this month’s finalised raft of UK PMIs could also weigh on GBP exchange rates this week.
Signs of ECB optimism fail to benefit euro
While the European Central Bank (ECB) noted that the global growth outlook appeared to stabilise in the fourth quarter this failed to shore up the euro on Friday.
Markets still see little chance of the ECB adopting a more hawkish outlook in the near future, with interest rates looking set to remain at their current levels for some time to come.
Even though the risk of a fourth quarter German recession has receded investors may still find limited cause for confidence in the economic outlook, limiting the appeal of the euro.
US dollar to extend losses as advance trade goods deficit widens
The US dollar was left under pressure ahead of the weekend as the US labour market data disappointed.
A general uptick in market risk appetite also weighed on the risk-sensitive USD, with hopes of an imminent signing of the US-China phase one trade agreement encouraging investor confidence.
Demand for the US dollar looks set to remain muted today with forecasts pointing towards a widening of November’s advance goods trade deficit.
Fresh evidence that ongoing trade tensions with China have weighed on the US economy could see USD exchange rates shedding further ground.
Monday, 30th December 2019
13:30 USD Advance Goods Trade Balance
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)