The US dollar fell to two-week lows against its major rivals yesterday after concerns over the US economy’s resilience sapped USD demand.
Sterling is subdued this morning however, with GBP/EUR flat at €1.1369, GBP/USD muted at $1.2903 and GBP/CAD stable at C$1.7100, while GBP/AUD and GBP/NZD holding steady at AU$1.8190 and NZ$1.9121 respectively.
Coming up later today will be the BoE’s first rate decision of 2019, potentially resulting in Sterling weakening if the bank strikes a more dovish outlook for the coming year in light of growing global uncertainty.
What’s been happening?
The pound pushed higher yesterday, despite lacking any real catalyst for movement, with Sterling instead climbing on the back of weakness in its peers.
Driving the GBP/EUR exchange rate was the publication of Germany’s latest factory orders figures, with the euro coming under pressure as a surprisingly strong contraction in orders in December reignited fears that Germany may be headed towards a recession.
However, the GBP/USD exchange rate remained largely rangebound yesterday as the US dollar found support from a pick-up in safe-haven demand as well as a surprisingly strong narrowing of the US trade deficit in November.
What’s coming up?
Looking ahead, today’s spotlight will be on the Bank of England (BoE) as it concludes its first policy meeting of 2019.
No policy changes are expected from the bank today, instead GBP investors will be left to focus on the bank’s forward guidance.
This may result in the pound losing out if ongoing Brexit uncertainty and signs of a global slowdown result in the bank revising its expectations for a rate hike in 2019, as some analysts suspect.
Meanwhile, the Euro may struggle again today following the release of Germany’s latest industrial production figures earlier this morning, as another decline further fuels concerns that Germany may be facing a recession.
Finally, Federal Reserve Vice Chair, Richard Clarida, will speak later this afternoon, potentially limiting the appeal of the US dollar if he reinforces the bank’s recent dovish shift.
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)