The pound was driven lower again yesterday, with Theresa May’s rejection of the EU’s new proposals for the Irish border reigniting fears of a no-deal Brexit.
Sterling continues to tread water this morning, with GBP/EUR flat at €1.1225, GBP/USD on the defensive at $1.3010 and GBP/CAD muted at C$1.6988, while GBP/AUD and GBP/NZD are both trading narrowly at AU$1.8294 and NZ$1.9974 respectively.
Looking ahead, the euro may be in focus today, with EUR investors bracing for a possible drop in the single currency should Eurozone industrial production be shown to have contracted again in July.
What’s been happening?
After a stellar start to this week’s session, the pound appeared to suddenly run out of momentum on Tuesday, despite the UK’s latest employment figures revealing a surprise rise in domestic wage growth in July.
Sterling’s lacklustre performance yesterday was partially attributed to the muted reaction to the announcement that Mark Carney would be staying on as Bank of England Governor until the start of 2020.
This came as a disappointment to many GBP investors as it will only lead to Carney extending his time at the bank by seven months and not serving his full term to guide the UK through the entirety of the Brexit transition period, as many had hoped.
The GBP/EUR exchange rate traded narrowly during yesterday’s session as the weakness in the pound was offset by a broadly pessimistic outlook in Germany’s latest economic sentiment survey.
This saw the euro face some notable headwinds on Tuesday as economists’ outlook remained gloomy this month in the face of Turkey’s currency crisis.
Meanwhile the GBP/USD exchange rate fell back on Tuesday, with demand for the US dollar picking up speed again in the wake of threats from Donald Trump to impose tariffs on all Chinese goods. If this were to happen it would represent a marked escalation in global trade tensions.
What’s coming up?
Barring any major Brexit developments or further comments from the EU’s Michel Barnier, the absence of any notable UK data could leave the pound largely muted on Wednesday, prompting investors to look ahead to tomorrow’s rate decision by the BoE.
Meanwhile the euro may be left on the back foot today following the release of the Eurozone’s latest industrial production figures, as economists forecast the block will have suffered another contraction in factory output in July.
At the same time the US dollar could be spurred higher this afternoon as analysts predict today’s US producer price index will report a rise in producer inflation last month.
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)