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UK GDP contraction drives pound to fresh lows

business-articlesUK GDP contraction drives pound to fresh lows
  • Pound slumps to fresh lows after growth contraction
  • US dollar vulnerable to widened budget deficit
  • Signs of stronger economic activity boost New Zealand dollar
 
 
Pound under pressure thanks to risk of snap general election
 
News that UK gross domestic product contracted -0.2% in the second quarter left the pound under pressure on Friday.
 
The report exacerbated concerns that the UK economy is on track to fall into recession ahead of the October Brexit deadline, and GBP/EUR fell to a within touching distance of a ten-year low.
 
Speculation over the possibility of an imminent snap general election also looks set to keep GBP exchange rates on a weaker footing in the near term.
 
 
Widening US budget deficit set to drag on USD
 
The mood towards the US dollar could sour this afternoon on the back of July’s monthly budget statement.
 
Markets anticipate another monthly deficit as the US trade relationship with China continues deteriorating.
 
Given the already dovish outlook of the Federal Reserve, if the deficit widens significantly this may drive USD exchange rates into a sharp downtrend.
 
On the other hand, signs that the deficit is narrowing could encourage investors to buy back into the US dollar.
 
 
Rising food price index forecast to boost New Zealand dollar
 
An unexpectedly strong rebound in July’s ANZ truckometer encouraged the New Zealand dollar to pick up on Friday, with the currency recovering some of its weekly losses.
 
With economic activity showing signs of recovering, in spite of the wider global slowdown, NZD exchange rates found a positive foothold.
 
NZD could strengthen further tonight if July’s food price index points towards a higher level of domestic inflation.
 
A solid increase in food prices would suggest that inflationary pressure picked up at the start of the third quarter, reducing the case for further Reserve Bank of New Zealand (RBNZ) monetary loosening.
 
 
Upcoming Data:
 
Monday, 12th August 2019
19:00 USD Monthly Budget Statement
23:45 NZD Food Price 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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