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- Higher inflation may dent pound sterling
- Euro losses likely on underwhelming Eurozone growth
- US dollar to find support on latest consumer price index
Pound vulnerable to overheating UK consumer price index data
The pound could lose some of its bullishness today if October’s UK consumer price index shows a fresh uptick on the year.
Forecasts point towards the headline inflation rate rising from 2.4% to 2.5%, something which would cut into the wage growth seen in yesterday’s earnings data.
With the Bank of England (BoE) looking set to keep interest rates on hold as a result of Brexit for some time to come the impact of a higher inflation rate is likely to prove negative.
Speculation over Brexit could also drag on GBP exchange rates today, unless there are signs that progress towards an agreement is picking up.
Euro to remain under pressure thanks to weakening Eurozone growth
The second estimate for the third quarter Eurozone gross domestic product is expected to confirm that growth eased from 0.4% to 0.2% on the quarter.
This could weigh heavily on the euro today, given that the economy has already shown signs of weakening at the start of the fourth quarter.
As long as signs continue to point towards the Eurozone losing momentum into the end of 2018 the appeal of the single currency will be limited.
EUR exchange rates may also come under pressure as the Italian budget dispute rumbles on.
Solid inflation to support US dollar demand
USD exchange rates could recover some ground this afternoon with the release of October’s US consumer price index data.
Any increase in inflationary pressure is likely to bolster the case for the Federal Reserve to raise interest rates in December, offering support to the US dollar.
Even so, with the impact of an imminent rate hike already effectively priced into USD exchange rates a strong inflation rate may struggle to boost the US Dollar significantly.
Comments from Fed Chair Jerome Powell will also be in focus tonight as investors seek to gauge the likely pace of monetary tightening over the coming year.
Wednesday, 14th November 2018
09:30 GBP Consumer Price Index
10:00 EUR Eurozone Gross Domestic Product
13:30 USD Consumer Price Index
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)