As geopolitical tensions between the East and West rise, sanctions and souring relations could have lasting impacts on business globally.
- Political anxiety puts pressure on pound
- Signs of weaker German inflation weigh on euro
- US dollar strengthens after positive retail sales data
Conservative leadership contest dominates pound outlook
After Matt Hancock withdrew from the Conservative leadership contest, having secured just 20 votes in the first round, the mood towards the pound soured.
Hancock was considered one of the more moderate candidates in the race, so his withdrawal prompted fresh anxiety over the prospect of a no-deal Brexit.
However, if the remaining candidates talk down the risk of the UK leaving the EU without a deal in October this may encourage GBP exchange rates to recover ground in the days ahead.
An air of political uncertainty still looks set to limit the upside potential of the pound for the foreseeable future, though.
Euro losses likely on weaker wage growth
The disappointing nature of Friday’s German wholesale price index left the euro on a weaker footing ahead of the weekend.
With inflationary pressure within the Eurozone still proving muted the risk of the European Central Bank (ECB) maintaining a dovish bias for months to come remains high.
Demand for the euro could diminish further this morning if the first quarter Eurozone wage growth index eases on the year.
Evidence of weaker wage growth would give the ECB further cause for dovishness, putting fresh pressure on EUR exchange rates.
Manufacturing sector weakness to dent US dollar
Although US advance retail sales date proved encouraging this may not be enough to keep the US dollar on a positive trend for long.
This afternoon’s Empire manufacturing index is forecast to dip from 17.8 to 12.75 on the month in June, suggesting that the sector ended the second quarter in a weaker state.
As long as the US economy appears on track to see a slowdown in the second quarter the strength of USD exchange rates is likely to remain limited.
A weaker showing here would also add to the case for the Federal Reserve to loosen monetary policy before the end of the year.
Monday, 17th June 2019
10:00 EUR Eurozone Wage Growth Index
13:30 USD Empire Manufacturing 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)