The pound fell against the rest of its peers on Wednesday as some softer-than-expected inflation data prompted traders to rethink their expectations of an August rate hike.
Meanwhile Sterling appears to be consolidating its gains this morning, with GBP/EUR flat at €1.1312, GBP/USD stable at $1.3263 and GBP/CAD muted at C$1.7428, while both GBP/AUD and GBP/NZD tick higher, striking AU$1.7893 and NZ$1.9461.
Looking ahead the US will publish its latest PPI figures this afternoon, with an expected slide in producer inflation potentially weakening the US dollar…
What’s been happening?
Following on from the sharp drop in the GBP exchange rate on Monday after Boris Johnson’s resignation, the pound rebounded against the majority of its peers on Tuesday as fears of a possible leadership contest began to ease.
With Tory rebels apparently lacking the 48 signatures required to trigger a formal leadership challenge following a warning from Theresa May on the possibility of a Labour government, it looks like the PM has dodged another bullet for now.
Also aiding Sterling’s rally during yesterday’s session was the publication of the UK’s first monthly GDP reading.
GBP investors welcomed the data, which revealed the UK economy expanded by a solid 0.3% in May, with the warmer weather helping to spur on growth.
The GBP/EUR exchange rate was able to recoup all of Monday’s losses yesterday, with the euro struggling to hold its ground against the pound following a sharp downturn in economic sentiment in Germany.
The latest ZEW survey of economists revealed German investor confidence is at a six-year low this month as economists fear a potential global trade war could negatively impact Europe’s largest exporter.
At the same time, the GBP/USD exchange rate stalled on Tuesday, with the recent rise in political uncertainty driving demand for the US dollar due to its status as a safe-haven currency.
What’s coming up?
A speech by Bank of England (BoE) Governor, Mark Carney is the only UK event of note today, with the pound potentially ticking a little higher should he continue to hint at the possibility of an August rate hike.
However with observers suggesting that there could be more political uncertainty to come, the potential for volatility remains.
Meanwhile the euro may continue to struggle today, with a lull in notable data potentially leaving the single currency exposed to external influences.
Finally, a slight dip in the latest US PPI figures could drag on the US dollar this afternoon, especially if it is seen as dampening the case for a fourth rate hike from the Federal Reserve this year.
Joining the corporate trading desk in 2007, Phil now overseas 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 FSA approval and has completed the Certificate in International Treasury Management (CertiTM)