Parliamentary suspension drags pound lower

Currencies Direct August 29th 2019 - 2 minute read

  • Pound slides, Parliament set for five-week suspension
  • Steady German confidence benefits euro
  • US dollar shrugs off fears of potential recession

Proroguing of Parliament set to dominate pound outlook
The pound fell sharply out of favour as Boris Johnson moved to suspend Parliament for five weeks.
This proroguing of Parliament until mid-October significantly increases the risk of the UK crashing out of the EU without a deal.
Political anxiety is likely to keep GBP exchange rates under pressure today as MPs respond to this development.
Euro braced for weaker German inflation
A steady reading from the German GfK consumer confidence index helped to shore up the euro yesterday.
However, the mood towards the single currency could sour this afternoon with the release of August’s German consumer price index data.
As forecasts point towards the inflation rate easing from 1.7% to 1.5% on the year this could offer the European Central Bank (ECB) fresh incentive to cut interest rates.
Although the ECB is already widely expected to loosen monetary policy at its September meeting evidence of weakening inflation could still put pressure on EUR exchange rates.
Fears of recession fail to weigh on US dollar
As the US bond yield curve remained inverted markets are still wary of the prospect of a potential US recession.
Even so, this anxiety was not enough to prevent USD exchange rates gaining ground in the face of market risk aversion.
Demand for the US dollar could weaken today, though, as markets expect to see a widening of the advance goods trade deficit.
Fresh signs that ongoing US-China trade tensions are weighing on domestic activity and limiting spending could knock USD exchange rates off their positive footing.
Upcoming Data:
Thursday, 29th August 2019
13:00 EUR German Consumer Price Index
13:30 USD Advance Goods Trade Balance

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