• Sterling rally finally comes to an end
  • German CPI inflation fails to provide support
  • Dollar stabilises despite disappointing manufacturing number

Sterling rally comes to an end

The pound posted a relatively flat performance yesterday, despite suffering some increased volatility in the early hours of the day’s trading. A small, yet expected fall in UK CPI inflation brought the recent three-day run of sterling strength to an end. However, following the recent rally the currency remains near the highs following the UK’s decision to leave the EU.

A lack of economic data releases could see the pound vulnerable to wider market pressures today. However, with the looming Bank of England meeting next week, investors may begin to move to the sidelines. While the UK central bank is expected to keep the interest rate unchanged at half a percent, investors will be paying close attention to Mark Carney’s comments, and to the return of any rumours regarding a softer Brexit.

Euro steady as German CPI comes out in line with expectations

The single currency followed the pound yesterday, trading broadly flat across the board but suffering from increased volatility against its counterparts. A steady German CPI inflation number failed to provide the single currency any notable strength, with investors waiting for the ECB’s meeting next week before taking a strong stance on the euro. Rumours that the central bank could unwind its stimulus package sooner than expected has allowed the euro to rise to recent highs.

In a similar fashion to the pound, a lack of economic data releases today is likely to leave the currency struggling to make any notable gains and vulnerable to wider market pressures.

Dollar slide finally ends on lack of wider pressure

The greenback’s recent run of poor performance came to an end yesterday, capping any further losses and trading flat across the board. While NY Fed manufacturing came out slightly lower than expected, a lack of wider market pressures allowed the greenback some breathing room. Despite this lack of short-term pressures, the dollar index remains near its recent three-year low.

Today we have the release of US industrial output, which is expected to fall by 0.2% and could see pressure applied to the greenback. On top of this, if we see wider markets continue to be supported by positive sentiment surrounding Brexit and a reduction in QE, the downside for the dollar may be more pronounced.

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