Pound at 14-month low be US dollar as Turkey Concerns Persist

Pound at 14-month low be US dollar as Turkey Concerns Persist

The pound stumbled to a new 14-month low against the US dollar yesterday as an underwhelming UK inflation report failed to offset the ongoing gains in USD as result of soaring safe-haven demand.

Sterling appears to be on the defensive this morning, with GBP/EUR edging down to €1.1178 and GBP/CAD muted at C$1.6682. GBP/AUD and GBP/NZD have tumbled to AU$1.7498 and NZ$1.9315 respectively. Only GBP/USD appears to be showing any positive movement so far as it rallies from yesterday’s lows to strike $1.2714.

The release of the UK’s latest retail date may allow the pound to trade higher this morning if sales growth rebounds in July as expected…

What’s been happening?             
                                         
The pound trended narrowly against the majority of its peers on Wednesday as markets shrugged off a rise in UK inflation.

The UK’s latest Consumer Price Index revealed UK inflation rose from 2.4% to 2.5% in July, the first increase since November last year.

However the slight uptick in price growth was not seen as likely to change the Bank of England’s (BoE) cautious outlook towards further rate hikes, leaving Sterling muted during the European session as markets instead focused on the potential impact on consumer spending.

The GBP/EUR exchange rate briefly edged higher during yesterday’s session, with the euro placed on the defensive as it was troubled by the ongoing meltdown in the Turkish lira.

Analysts are now warning that Turkey’s currency crisis could impact the European Central Bank’s (ECB) timetable for normalising monetary policy, delaying its next hike until late 2019 or even 2020.

Meanwhile the GBP/USD exchange rate fell below $1.27 to strike a new 14-month low on Wednesday, as Turkey jitters saw investors continue to seek shelter in safe-haven currencies.

This upswing in the US dollar was further supported by the latest US retail sales figures, with USD investors being pleasantly surprised by stronger-than-expected sales growth in July.

What’s coming up?

Looking ahead, the pound may fare better during today’s session following the publication of the UK’s latest retail sales figures.
Analysts are forecasting that domestic sales growth will have rebounded from -0.5% to 0.2% in July, likely helping to buoy Sterling.

The euro, meanwhile, may look to shore up its defences with the release of the Eurozone’s latest trade figures, with an expected rise in the bloc’s trade surplus potentially staving off more Turkey driven losses.

Finally the US dollar is likely to continue to strengthening thanks to safe-haven demand today, with the possibility of another robust performance by the Philadelphia Fed Manufacturing Index also potentially aiding the US currency.