Pound weakens against strong euro

Stock markets in the US plummeted yesterday as fears over expected US interest rate rises and the slowdown in China gripped the market. In her speech last week, US Federal Reserve Chair Janet Yellen adopted a hawkish tone to tell the markets that an interest rate rise could very well come in October.
 
Having also said that the meetings for the near term will be “live”, it is becoming increasingly difficult to analyse when the Fed will increase rates – though it will definitely happen sometime in these remaining weeks of 2015. Meanwhile, yesterday’s release of US consumer spending data  revealed that sales have been fairly strong, making the release of the non-farm payroll numbers on Friday all the more important.
 
With the absence of economic data from the Eurozone yesterday, conflicting statements from the Federal Reserve over the last few weeks have weakened the dollar slightly: EUR/USD climbed back up to 1.1275 where it currently trades. Last week, Mario Draghi also gave a speech where he reinforced that, although he does not see any risks to financial stability yet, should the need arise the European Central Bank is willing to further strengthen its asset purchase programme.
 
Today, markets will focus on German and Spanish consumer prices index data and German retail sales, whereas from the US scheduled US economic data releases comprise of Redbook numbers and the regular crude and gas stock inventories.
 
Sterling has slipped across the board, with no substantial economic data out to push the pound. With key data due from Europe, volatility in GBP/EUR may increase as the pound has dropped this morning. Bank of England Governor Mark Carney is scheduled to speak at Lloyds of London later this evening, and investors will also keep a close eye on Gfk consumer confidence data to be released.
 
Enjoy your day.