The pound stumbled to a new 14-month low against the US dollar yesterday as an underwhelming UK inflation report failed to offset the ongoing gains in USD as result of soaring safe-haven demand.
Sterling has been left to lick its wounds this morning, with GBP/EUR muted at €1.1095 and GBP/USD flat at $1.2860, while GBP/CAD and GBP/AUD both hold steady at C$1.6820 and AU$1.7430 respectively. Only GBP/NZD is showing any real movement so far today, with a dovish Reserve Bank of New Zealand (RBNZ) driving the pairing up to NZ$1.9315.
The US will publish its latest PPI figures this afternoon, potentially limiting the US dollar’s gains if producer price growth is revealed to have slowed in July.
What’s been happening?
The pound went into a tail spin on Wednesday, accelerating the losses seen on Monday and striking new multi-month lows against the majority of its peers as markets grew increasing uneasy regarding Brexit.
Markets ramped up bets of a ‘no-deal’ Brexit on Wednesday, leading city traders to hedge against an expected freefall in Sterling in the event of the UK crashing out of the EU without a deal.
There appeared to be no major headlines behind Wednesday’s move, suggesting that swelling anxiety over the limited progress in Brexit negotiations may have finally come to a head.
The broad-based fall in the pound saw the GBP/EUR exchange rate retreat to a new nine-month low during yesterday’s trading session, and extending the pairing’s losses this week to over a cent.
Meanwhile, the slump in the GBP/USD exchange rate was accelerated on Wednesday by another escalation in trade tensions between the US and China, propelling the pairing below $1.29 for the first time in almost a year.
Investors flocked to the relative safety of the US dollar yesterday as Beijing retaliated to US tariffs on $16bn worth of Chinese goods by announcing tit-for-tat measures against a range of US products.
What’s coming up?
Looking ahead, the pound faces another lull in domestic data today, potentially leading the pound to extend its losses even further if Brexit remains in focus for traders.
Meanwhile, the euro could see some movement today on the back of the European Central Bank’s (ECB) latest economic bulletin, with the EUR exchange rate potentially weakening if the bank’s outlook appears dovish in tone.
Finally the US dollar could find its march higher slowed this afternoon as economists forecast a slight slowdown in the latest US PPI figures.
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)