Pound mixed after poor US data

An empty data calendar at the end of last week left the pound at the mercy of developments in other currencies. Today, Sterling is struggling to get off the starting blocks.

GBP/EUR is holding opening levels at €1.0998, GBP/USD has also yet to make progress this morning and is trending flatly at US$1.3008. GBP/AUD has made minor gains to reach AU$1.6494, while GBP/NZD has climbed 0.3% to NZ$1.7796. GBP/CAD remains around opening levels of CA$1.6503.

It’s another empty day of data for the UK today, but read on to see which Eurozone and US developments could push Sterling higher…

What’s been happening?

There was no UK domestic data released on Friday, which left the pound reacting to long-term concerns over the economy and interest rates, as well as developments overseas.

The pound was able to end the week with sharp gains against the US dollar thanks to a poor showing from the latest US inflation data.

July’s consumer price index grew 0.1% on the month - against predictions of 0.2% - meaning the year-on-year index only edged from 1.6% to 1.7%, instead of the 1.8% economists had expected.

Core consumer price growth, which removes the influence of volatile food and energy prices, held at 1.7% as expected.

This further weakened the odds that the Federal Reserve would vote to hike interest rates in its December policy meeting.

In fact, the monetary policy outlook is so gloomy that not only is there a 61.5% chance that interest rates will remain frozen, but markets have now started pricing in the possibility that rates may actually be cut to 1% in the final policy meeting of 2017.

This allowed GBP/USD to climb at the end of the week. However, because of the negative correlation between the euro and the US dollar, weakness in the latter boosted demand for the former, so GBP/EUR slumped.

What's coming up?

It will be another quiet session for the pound from an economic data point of view today. No releases are scheduled, meaning Sterling will find itself in the same position as on Friday, unless notable news emerges from the political sphere.

GBP/EUR could receive a boost from this morning’s Eurozone industrial production figures, which are predicted to show a decline on the month, and a sharp slowdown in growth on the year.

There is nothing of interest on the US data calendar, although those swiftly dwindling odds of a third interest rate hike taking place this year are likely to weigh on the US dollar, which could benefit the pound.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.