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Pound stumbles as surprise UK inflation dip fuels BoE rate cut bets

business-articlesPound stumbles as surprise UK inflation dip fuels BoE rate cut bets
  • UK inflation miss drags on pound
  • Euro strengthens in spite of German slowdown
  • Manufacturing improvement fails to boost US dollar
 
 
High odds of BoE interest rate cut leave pound under pressure
 
GBP exchange rates came under renewed pressure in the wake of December’s UK consumer price index, which missed market forecasts.
 
A surprise easing in the headline inflation rate left the pound on a weaker footing against its rivals yesterday as the odds of an imminent Bank of England (BoE) interest rate cut continued to grow.
 
Fresh comments from BoE policymaker Michael Saunders added to the bearish mood, meanwhile, as he noted that the UK economy remains in a sluggish state.
 
However, as the impact of the weaker inflation data fades the pound could recover some of its lost ground over the course of the day.
 
 
Euro braces for latest ECB meeting minutes
 
Germany’s annual gross domestic product slowed sharply from 1.5% to 0.6% on the year in 2019, highlighting the negative impact of the global trade slowdown.
 
However, as the decline was in line with market expectations this had a limited impact on the euro during yesterday’s trading session.
 
EUR exchange rates look vulnerable to fresh volatility on the back of the European Central Bank’s (ECB) December meeting minutes, though.
 
Unless policymakers demonstrate greater signs of optimism over the Eurozone economic outlook the potential for further euro gains looks limited.
 
 
US dollar gains forecast on retail spending uptick
 
A better-than-expected Empire State manufacturing index failed to offer the US dollar any particular encouragement yesterday.
 
The mood towards the US dollar could improve this afternoon, though, if advance retail sales strengthen on the month.
 
Evidence of stronger spending over December may give USD exchange rates a boost by pointing towards greater domestic resilience in spite of ongoing trade worries.
 
 
Upcoming Data:
 
Thursday, 16th January 2020
12:30 EUR European Central Bank Meeting Minutes
13:30 CAD ADP Employment Change
13:30 USD Advance Retail Sales
 
 
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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