The pound plummeted on Tuesday as the latest UK PMIs printed well below expectations.
Sterling remains stuck in a narrow range so far this morning, with GBP/EUR subdued at €1.1117 and GBP/USD muted at $1.3040. GBP/CAD is flat at C$1.7376, while GBP/AUD and GBP/NZD edge higher to AU$1.8301 and NZ$1.9914, respectively.
Meanwhile, data showing that the UK entered a recession for the first time in 11 years is likely to limit any upside in GBP exchange rates today.
What’s been happening?The pound struggled to find any momentum yesterday on the back of the UK’s latest employment report.
The figures made for mixed reading as while the unemployment held steady at 3.9% in June, thanks to the government’s furlough scheme, employment fell by its fastest pace in over a decade.
On top of this wage growth plunged over the same period, with regular wages (excluding bonuses) contracting for the first time since 2001.
The euro, meanwhile, ticked higher yesterday after the latest ZEW surveys saw German economic sentiment print at a 16-year high in August.
These gains ultimately proved limited, however, as EUR investors continued to express their concern over the recent coronavirus resurgence in Europe.
At the same time, the US dollar fell back on Tuesday as Donald Trump’s suggestion that he is ‘seriously’ considering a capital gains tax cut bolstered market optimism, which in turn dented demand for the safe-haven ‘Greenback’.
What’s coming up?Turning to today’s session, the pound is likely to struggle to find support again today after the UK’s second quarter GDP figures confirmed the country entered a recession after a whopping 20.4% contraction of growth.
However, with the drop already largely priced in by GBP investors and accommodating data printing positively, any downside in Sterling may also be limited today.
For USD investors the focus today looks to be on the US consumer price index (CPI). Will another uptick in inflation last month help to improve the appeal of the US dollar this afternoon?
Across the channel, the publication of the Eurozone’s latest industrial production figures may help the euro to extend yesterday’s gains if factory output in the bloc rose in line with expectations in June.
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)