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Pound stumbles but UK inflation hits six-month high

business-articlesPound stumbles but UK inflation hits six-month high
  • Rising UK inflation rate fails to boost pound
  • Widened current account surplus shores up euro
  • US dollar falters as market risk appetite improves
 
 
Rebound in retail sales may encourage pound gains
 
Support for the pound weakened yesterday even though the headline UK consumer price index picked up further than forecast.
 
While inflation jumped from 1.3% to 1.8% in January GBP exchange rates dipped, with investors discouraged by the monthly contraction in price pressures.
 
The mood towards the pound could improve this morning, though, if January’s UK retail sales data rebounds as expected.
 
Evidence that consumer spending picked back up at the start of 2020 could go some way towards easing market anxiety over the economic outlook, offering GBP exchange rates support.
 
 
Euro vulnerable ahead of ECB minutes
 
As the Eurozone current account surplus widened in December this helped to shore up the euro against its rivals yesterday.
 
However, EUR exchange rates could face renewed downside pressure this afternoon if January’s European Central Bank (ECB) meeting minutes fail to impress.
 
Any dovish hints from ECB policymakers may encourage investors to sell out of the single currency once again.
 
On the other hand, if the minutes reaffirm the central bank’s willingness to leave monetary policy on hold this could keep the euro on a positive footing.
 
 
Softer manufacturing index to limit US dollar support
 
With market risk appetite showing signs of picking up on Wednesday the US dollar struggled to find any particular upside momentum as safe-haven demand weakened.
 
Although January’s producer price index data highlighted an uptick in price pressures this was not enough to give USD exchange rates any particular boost.
 
Confidence in the underlying health of the US economy could receive a blow this afternoon if the Philadelphia Fed manufacturing index weakens as anticipated.
 
As long as the manufacturing sector shows signs of slowing the US dollar looks set to slip against its rivals.
 
 
Upcoming Data:
 
Thursday, 20th February 2020
09:30 GBP Retail Sales
12:30 EUR European Central Bank Meeting Minutes
13:30 USD Philadelphia Fed 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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