After soaring in response to the Conservative’s decisive election victory the pound quickly began shedding ground through Friday’s session.
- Disappointing UK wage growth drags on pound
- Euro benefits from improvement in Eurozone economic sentiment
- Business optimism miss fails to dent US dollar
Pound vulnerable to any softening in UK inflation
A weaker-than-expected month of UK wage growth put a dampener on the pound yesterday, limiting the impact of an improved unemployment rate.
GBP exchange rates are likely to come under renewed pressure this morning as forecasts point towards an easing in the headline consumer price index.
If the inflation rate dips from 1.7% to 1.6% as expected this could see the pound fall out of favour.
As long as inflation moves further away from the Bank of England’s (BoE) 2% target the growing risk of an interest rate cut looks set to weigh on GBP exchange rates.
Weak Eurozone industrial production set to dent euro
November’s ZEW economic sentiment indexes unexpectedly improved on Tuesday, offering the euro a modest boost.
As the Eurozone sentiment index picked up from -23.5 to just -1 this encouraged hopes that the currency union could shrug off some of its economic weakness in the final quarter of the year.
However, the mood towards the euro could soon sour if the latest Eurozone industrial production figures show another month of deterioration.
Fresh evidence of weakness within the Eurozone manufacturing sector could see EUR exchange rates falter, especially as concerns over the health of the German economy remain.
Signs of steady inflation may extend US dollar gains
A slight miss from the latest NFIB small business optimism index was not enough to prevent the US dollar gaining ground yesterday.
USD exchange rates may maintain a positive footing this afternoon if October’s US consumer price index holds steady.
While the CPI is not the Federal Reserve’s preferred measure of inflation a lack of change here could still support the case in favour of leaving interest rates on hold.
13th November 2019
09:30 GBP Consumer Price Index
10:00 EUR Eurozone Industrial Production
13:30 USD Consumer Price Index
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