Pound nears 2019 low as political jitters grow
Philip McHugh May 31st 2019 - 2 minute read
The pound came dangerously close to a new 2019 low against the US dollar yesterday as Sterling continue to be mired in political uncertainty.
Sterling continues to tread water this morning, with GBP/EUR subdued at €1.1323, GBP/USD flat at $1.2613 and GBP/CAD muted at C$1.7081, while GBP/AUD and GBP/NZD hold steady at AU$1.8239 and NZ$1.9366 respectively.
Coming up today we have the release of Germany’s latest inflation figures, which could push the euro lower if price growth slowed in the country as forecast in May.
What’s been happening?
Becoming something of a theme this week, the pound remained subdued on Thursday, with UK political jitters continuing to paralyse the currency as Jeremy Corbyn suggested a second referendum is ‘some way off’, scuppering hopes the Labour leader was close to backing the move.
Further limiting the appeal of Sterling yesterday, were comments from Bank of England Deputy Governor Dave Ramsden, who suggested the bank’s recent growth forecasts may be too optimistic as he speculated that investment and productivity are likely to undershoot expectations this year.
This translated into only limited movement in the GBP/EUR exchange rate yesterday as the euro also struggled to find support when Italy’s debt drama began to flare up again, with observers warning of future clashes between Brussels and Rome.
Meanwhile, the GBP/USD exchange rate threatened to fall to a fresh 2019 low yesterday as the US dollar was buoyed by rising US-China trade tensions as well as a robust US GDP estimate for the first quarter.
What’s coming up?
Looking ahead, we have the publication of Germany’s consumer price index, which is likely to dampen the appeal of the euro as is expectation to reveal inflation slowed from 2% to 1.6% in May.
This follows the release of Germany’s retail sales figures earlier this morning, where a surprise contraction in sales last month is already weighing on the single currency.
Meanwhile, USD investors will be focused on the latest US PCE price index, which may lend some further support to the US dollar if domestic inflation is shown to have strengthened last month.
Finally, expect to see Sterling remain sensitive to political developments in the UK for the remainder of this week’s session as investors speculate on how the upcoming Conservative leadership contest may shape Brexit.