The pound tumbled yesterday after the Bank of England (BoE) forecast a UK recession beginning in the fourth quarter of this year.
The pound starts the week on the rebound, with GBP/EUR up 0.1% to €1.1346, while GBP/USD is up 0.3% to US$1.3893. GBP/AUD is up 0.3% to AU$1.7366, GBP/NZD up 0.2% to NZ$1.9051, and GBP/CAD up 0.1% to C$1.7320.
There is nothing of interest on the economic data calendar today from the UK, Eurozone, or United States. Read on to see what long-term concerns could be driving GBP, EUR, and USD today…
What’s been happening?
A much worse than expected set of UK retail sales figures from December sent the pound slumping on Friday, although Sterling was able to recover much of the day’s losses against the euro by the time trading ended.
Sales excluding auto fuel declined -1.6% month-on-month, compared to forecasts of -1%, while sales including fuel dropped -1.5% instead of the expected -0.9%.
This dragged the year-on-year growth rate down to half its expected level, while the previous month’s growth rates were also cut.
Eurozone data was rather lacking, although what figures were released proved generally supportive, with the German producer price index showing the expected month-on-month acceleration from 0.1% to 0.2%.
The latest Eurozone current account figures showed a widening surplus in November, although October’s balance was revised downward.
However, recent comments from European central bankers regarding the strength of the euro saw it give back some of its gains later in the day, allowing the pound some respite.
A poor performance from the University of Michigan sentiment index for January failed to prevent GBP/USD from tumbling.
The index was expected to rise from 95.9 to 97, but instead weakened to 94.4.
What’s coming up?
The data calendar is incredibly sparse today, which could leave traders considering the long-term risks to the pound, euro, and US dollar.
Any comments relating to Brexit would give the pound fresh impetus, while the euro may be sensitive to developments regarding the German coalition talks between Angela Merkel’s CDU and their former grand coalition partners the SPD.
As we’ve just marked a year of President Donald Trump, markets may be reassessing his campaign pledges and the events of the past 12 months and readjusting their bets for the outlook of the US economy – especially given that the government is now shutdown due to a deadlock in Congress over funding.
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)