An unexpectedly sharp bounce in the latest IHS Markit household finance index was not enough to prevent the pound from shedding ground yesterday.
- Pound stable despite latest signs of UK economic slowdown
- US dollar falters as Fed acknowledges possibility of interest rate cut
- Euro under pressure ahead of Eurozone industrial production data
Pound shrugs off stagnant UK growth
News that the UK economy stagnated in the fourth quarter was not enough to drive the pound lower against many of its rivals yesterday.
As the monthly growth rate showed a solid 0.3% rebound in December this helped keep a floor under GBP exchange rates.
However, the persistent lack of clarity over the UK’s future trade relationship with the EU could still keep the pound biased towards the downside in the days ahead.
With EU officials looking set to take a tough line on key issues, the risk of the UK exiting the transition period without a deal is likely to hang over the pound for some time to come.
Fed dovishness weighs on US dollar
Although the NFIB small business optimism index picked up by more than forecast in January this failed to boost USD exchange rates.
Markets were spooked by the latest comments from Federal Reserve Chair Jerome Powell, who appeared to open the door to the possibility of further interest rate cuts.
As Powell acknowledged the risk of weaker Chinese growth prompting the central bank to cut rates demand for the US dollar slumped.
If tonight’s monthly budget statement shows a widened deficit this could add to the bearish mood of USD exchange rates.
Euro braces for fresh Eurozone industrial production decline
The latest commentary from European Central Bank (ECB) President Christine Lagarde did little to improve the appeal of the euro.
Lagarde noted that the Eurozone economy has been in a state of slowdown since the start of 2018, suggesting that the central bank is likely to maintain its dovish policy bias for longer.
Further losses are expected for the single currency this morning if the Eurozone industrial production figures weaken as forecast.
A fresh contraction in industrial production would add to existing worries over the health of the Eurozone economy, leaving the euro vulnerable to additional selling pressure.
Wednesday, 12th February 2020
10:00 EUR Eurozone Industrial Production
19:00 USD Monthly Budget Statement
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)