Trade in the Pound was mixed yesterday, after data showed that UK inflation soared to a new 40-year high in July.
Meanwhile, the pound is trading in a narrow range this morning, with GBP/EUR stable at €1.1899 and GBP/USD muted at $1.3084. GBP/CAD is rangebound at C$1.6702, while GBP/AUD and GBP/NZD hold steady at AU$1.7801 and NZ$1.9086, respectively.
Looking ahead, will we see some upbeat UK GDP figures offer some direction to GBP exchange rates today?
What’s been happening?
The euro traded in a wide range yesterday as EUR investors reacted to the ECB’s latest interest rate decision.
This initially saw the single currency strengthen as the ECB announced it would be keeping interest rates on hold, but accelerating the winding down of its asset purchasing programme, a move which bolstered hopes the ECB could raise interest rates by October.
However, these gains were quickly reversed in the wake of some cautious comments from ECB President Christine Lagarde, in which she said any interest rate hikes would be ‘gradual’.
The US dollar, meanwhile, firmed on the back of another strong US consumer price index, as domestic inflation rose to a new 40-year high of 7.9%, further boosting Federal Reserve rate hike expectations.
Reinforcing the upside in USD exchange rates was a more cautious market mood, after the latest peace talks between Russia and Ukraine failed to lead to a breakthrough.
Finally, the pound was left on the defensive through yesterday’s session as a lack of any notable economic releases as well as uncertainty over the situation in Ukraine left Sterling struggling to attract support
Kicking off today’s session was the publication of the UK’s latest GDP figures.
What’s coming up?
January’s figures reported a much larger-than-expected 0.8% expansion of growth, which could help to underpin the pound.
Also coming up on today’s data calendar is the release of the University of Michigan’s latest consumer sentiment index.
This could exert some pressure on the US dollar this afternoon as US consumer morale is expected to have continued to deteriorate this month, having already slumped to a decade low in February.
In the meantime, the situation in Ukraine will continue to influence the FX market, with the euro likely to remain particularly sensitive. This could see EUR exchange rates soften following yesterday’s failed peace talks.
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)