The pound continued retreating on Thursday, with lingering Brexit jitters overshadowing the UK’s stronger-than-expected retail sales figures.
Sterling remains rangebound this morning, with GBP/EUR flat at €1.1026, GBP/USD muted at $1.2169 and GBP/CAD subdued at C$1.6198. GBP/AUD and GBP/NZD have started to edge higher at AU$1.8126 and NZ$1.9331 respectively.
Looking ahead, we expect the spotlight to shift to the Eurozone’s latest CPI figures. Will another weak inflation reading dampen the euro?
What’s been happening?
Recent political developments in the UK continued to exert pressure on the pound yesterday.
Sterling was left subdued for much of the session as markets contemplated the near-term political fallout of Prime Minister Boris Johnson’s decision to suspend parliament.
Analysts predict opposition parties will seek to hold a vote of no-confidence in Johnson when parliament reconvenes next week, potentially triggering a general election if the vote is passed.
The euro struggled to find momentum on Thursday as Germany’s latest CPI figures showed a slump in domestic inflation from 1.7% to 1.4%, more than the expected slide to 1.5%.
Meanwhile, yesterday’s easing US-China trade tensions saw the Q2 US GDP revised slightly lower, limiting any upside in the US dollar.
What’s coming up?
The Eurozone’s latest CPI figures are likely to hold centre stage today.
Following Germany’s disappointing CPI release yesterday, this morning’s print is expected to confirm inflation lingering well below target.
This would endorse dovish policymakers within the European Central Bank (ECB) who want to see increased monetary stimulus for the Eurozone.
For USD investors the focus switches to this afternoon’s PCE Price Index, the Federal Reserve’s preferred indicator for inflation. An acceleration could potentially lend support to the US dollar.
Last but not least, GBP investors will almost certainly concentrate on Brexit today, leaving the pound vulnerable to further losses as the UK political situation continues to destabilize.
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)