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 holding its ground this morning however, with GBP/EUR flat at €1.1408, GBP/USD muted at $1.2868 and GBP/CAD stable at C$1.7090, while GBP/AUD and GBP/NZD hold steady at AU$1.8171 and NZ$1.9109 respectively.
In focus today will likely be Theresa May’s Brexit update to MPs, with the pound potentially weakening if investors remain unconvinced by the current state of talks.
What’s been happening?
The pound lost ground at the start of this week’s session as markets reacted to the UK’s latest GDP figures.
According to data published by the Office for National Statistics (ONS) UK growth slowed from 0.6% to just 0.2% in the fourth quarter, driven mostly by a contraction in the manufacturing sector.
The poor GDP growth resulted in the UK economy expanding by just 1.4% throughout 2018, the slowest annualised growth since 2012, which resulted in Sterling sliding over the session.
Helping to limit the losses in the GBP/EUR exchange rate were some comments from European Central Bank (ECB) Vice President, Luis de Guindos, with the euro facing pressure as he warned that Eurozone inflation is likely to continue to slow in the coming months, and that the ECB would need to be ‘prudent’ when setting monetary policy.
Meanwhile, the GBP/USD exchange rate slumped over half a cent on Monday, leaving the pairing close to a three-week low after a US border security agreement was reached in principle between the Democrats and Republicans, boosting hopes that a government shutdown later this week may be averted.
What’s coming up?
Looking ahead, movement in the pound today is likely to be driven by the market’s response to Theresa May’s Brexit update to MPs later this afternoon.
This will likely result in the downtrend in Sterling persisting today, unless May is somehow able to convince investors that she is closer to reaching an agreement with the EU over the Irish backstop agreement.
Meanwhile, USD investors will likely be focused on the latest JOLTs job opening figures this afternoon, with another robust reading likely to re-affirm the strength of the US jobs market.
Finally, in the absence of any notable date, the euro may struggle to find momentum today, potentially leaving it vulnerable to any upswing in its peers.
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)