The pound continued retreating on Thursday, with lingering Brexit jitters overshadowing the UK’s stronger-than-expected retail sales figures.
The pound appears to be holding ground so far this morning, with GBP/EUR steady at €1.1016, GBP/USD stable at $1.2242 and GBP/CAD flat at C$1.6196. GBP/AUD and GBP/NZD have both rallied, striking AU$1.8133 and NZ$1.9226 respectively.
Coming up this week, the Eurozone’s latest inflation figures are likely to prove a key focus for markets ahead of next week’s European Central Bank (ECB) policy meeting.
What’s been happening?
The US dollar came into focus at the top of last week’s session when China announced new tariffs on US products.
President Donald Trump provoked further tensions by ordering US companies to ‘come home’ from China and announcing retaliatory tariff hikes.
Federal Reserve Chair Jerome Powell’s speech at the annual Jackson Hole Symposium was also in the spotlight but left USD investors disappointed, offering few insights into future policy measures. Instead, an undemonstrative Powell simply stated the Fed would ‘act as appropriate’.
Going into the weekend, the pound was mostly rangebound last week, consolidating previous gains as Brexit optimism waned.
The EU sought to reaffirm its own Brexit position on Friday, with officials insisting its members remained united over Brexit.
Meanwhile, the euro remained static at the top of last week’s session, subdued by ongoing political turmoil in Italy. Italian President Sergio Mattarella has given the country’s main parties just four days to resolve the crisis or face snap elections.
What’s coming up?
Looking ahead, the Eurozone’s latest consumer price index could result in some volatility in EUR exchange rates this week.
Economists forecast inflation in the bloc will be static at just 1% in August, further bolstering expectations for a substantial September stimulus package from the ECB.
The continued absence of notable economic data should place Brexit firmly in the spotlight for GBP investors, an absence of any major breakthrough potentially limiting any further upside in the pound.
Finally, in the US, Thursday’s domestic GDP figures could help buoy the US dollar if they show resilient Q2 economic growth.
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