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.
This narrow trade in Sterling looks to continue this morning, with GBP/EUR muted at €1.1316, GBP/USD flat at $1.3218 and GBP/CAD stable at C$1.7445. Meanwhile both GBP/AUD and GBP/NZD are edging lower in early trade, sinking to AU$1.7897 and NZ$1.9536 respectively.
Looking forward the focus today is likely to be on the latest US CPI figures, with the US dollar likely to rise if inflation increases in line with expectations…
What’s been happening?
The pound fluctuated against many of its peers during yesterday’s session, with the currency initially sliding as Brexit uncertainty continued to weigh on sentiment.
However, a speech by Bank of England (BoE) Governor, Mark Carney, helped Sterling to rally later in the evening, with some reasonably upbeat comments helping to drive expectations of an August rate hike.
The GBP/EUR exchange rate saw limited movement on Wednesday, with the pairing trading flatly as markets reacted to reports of a push within the European Central Bank (ECB) to raise interest rates a little faster than previously planned.
Reuters reported that ECB policymakers are currently split on whether to hike rates at the start of summer next year, or wait until late 2019, with hopes of an earlier start to monetary tightening lifting euro sentiment.
At the same time, the GBP/USD exchange rate slumped during yesterday’s session, with trade jitters prompting investors to seek shelter in the relative safety of the US dollar.
This was sparked by a marked escalation in trade tensions between the US and China, with Washington threating to impose additional tariffs on $200bn worth of Chinese goods and Beijing vowing to respond in kind.
Further accelerating the ‘greenback’ was the release of some strong domestic data, with a robust PPI reading bolstering hopes of further monetary tightening from the Federal Reserve.
What’s coming up?
An empty data calendar may stifle movement in the pound today, with the currency potentially being exposed to some losses if GBP investors appear restless in the wake of the UK’s recent political uncertainty.
Meanwhile the euro may climb higher on the back of the Eurozone’s latest production figures as economists forecast factory output growth across the bloc will have rebounded from -0.9% to 1.2% in May.
However it is the US dollar which may see the most dramatic movement today, with an expected uptick in the latest US inflation reading potentially lifting USD on hopes it will increase the pressure on the Fed to keep raising interest rates.
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)