The euro slumped on Thursday following the European Central Bank’s (ECB) latest interest rate decision.
This morning Sterling is trading lower against the US Dollar but statically against other peers, with GBP/EUR at €1.1590, GBP/USD slipping to $1.1517 and GBP/CAD hovering at C$1.5672. GBP/AUD has edged slightly higher to AU$1.7956 while GBP/NZD is trading at NZ$1.9840.
Looking ahead, will a negative German GDP reading pile more pressure on the euro this morning?
What’s been happening?The euro retreated during yesterday’s session despite another 75bps interest rate hike from the European Central Bank.
As a 75bps increase was largely priced in, the focus for EUR investors was on the ECB’s forward guidance. They were left disappointed as ECB President Christine Lagarde refrained from committing to another oversized interest rate hike in December.
The US dollar, meanwhile, soared on Thursday in response to the latest US GDP figures after a stronger-than-expected reading confirmed the US economy rebounded from a technical recession.
Meanwhile, the pound was subdued yesterday as GBP investors digested the UK government’s decision to delay its tax and spending plans until 17 November.
GBP investors appeared concerned that the delay could complicate the Bank of England’s interest rate decision on 4 November, potentially leaving them to err on the side of caution.
What’s coming up?Germany’s GDP report will be in the spotlight today.
The preliminary figures for the third quarter are widely expected to show a 0.2% contraction, an outcome that could weigh on the euro.
Germany’s consumer price index is also due out this afternoon. If inflation rises in line with expectations this could provide some relief to EUR exchange rates before the weekend.
For USD investors the focus today will be on the core PCE price index, the Federal Reserve’s preferred indicator for inflation. Could a stronger-than-expected reading in September revive Fed rate hike bets and lift the US dollar?
Finally, with UK data thin on the ground today, GBP investors may look to domestic political developments for fresh impetus.
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)