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Sterling begins week subdued | euro suffers

Sterling begins week subdued

The pound has started the week near recent six-year lows against the euro. Analysts have suggested this is the result of Brexit-based concerns. It follows a European Union (EU) summit where no progress was made on the UK’s exit from the bloc.

The UK is set to see economic data released. Figures showing both the quarterly and annual GDP growth rate are scheduled to be released on Thursday. These figures are both forecast to be lower than the previous quarter and year respectively.

Although the euro had been negatively affected by European Central Bank (ECB) president Mario Draghi not confirming any changes to quantitative easing measures, the pound was still unable to stay competitive against the euro. However, sterling did not suffer as much as analysts expected it would as a result of the euro’s own weakness.

Many analysts think that demand for the pound will soften further in the coming week.

Euro suffers
The euro has suffered as a result of comments by Mr Draghi, who took a bearish tone towards monetary policy.

However, the currency is expected to see a slight boost following positive data from Germany, where inflation reached a 17-month high in October.

Analysts expect the euro to fall further against the strong dollar this week. However, the euro could also gain back some of its value against other currencies following the release of what analysts expect to be positive economic data, including Manufacturing PMI and Services PMI figures.

USD nears seven month high

The US dollar is nearing a seven-month high trading against the euro.
This week, the US will release third quarter GDP data. This is expected to reflect growth in the country’s economy and is predicted to have an effect on whether the US Federal Reserve will raise interest rates in December.

Analysts think that there is currently a more than 50% chance that interest rates will rise by 0.25% or more.
Consumer confidence figures will be released tomorrow (25 October) and are forecast to reflect a fall from 104.1 to 102. On Wednesday (26 October), data surrounding new home sales in October will be available. This number is currently forecast to rise by 610,000.

Chinese yuan slips to six-year low
The Chinese yuan has slipped to a six-year low against the US dollar, following global uncertainties, including Brexit. The UK’s decision to leave the EU hugely affected most emerging currencies, according to analysts.
There have been reports in China of state-owned banks selling US dollars in an attempt to slow the decline of the yuan.

Traders have also said that the yuan has been affected by the dollar’s strength.

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