• UK housing data better than expected
  • French CPI inflation stable
  • US jobs data disappoints

Sterling vulnerable to ongoing Brexit concerns

The pound posted a mixed performance yesterday, gaining 0.15% against the dollar but sliding by a third of a percent against the euro, as a lack of economic data releases combined with growing uncertainty around Brexit weighed on sterling investor sentiment. Comments alluding to preparation for a no-deal scenario by finance minister Philip Hammond have left many questioning the likelihood that the Bank of England will raise rates, as Mark Carney hinted at recently. 

This morning we have had the release of RICS housing data, which provided the currency with a modicum of support, coming out in line with prior rather than falling two points as expected. Despite this, investor focus will remain on looming Brexit negotiations and the question of stability hanging over Theresa May’s head.

Euro performs well on positive data

The euro continued to perform well in yesterday’s trading day, gaining 0.3% against the pound and 0.45% against the dollar. Positive German trade data and easing tensions in Catalonia were bolstered by an increase in industry numbers from Italy, which left many expecting a tapering of the ECB’s stimulus package sooner than expected.

This morning we have had the release of French CPI inflation, which fell on the monthly index but remained stable at 1.1% on the annualised index. While this has had limited impact on the currency, it will add weight to the argument that the ECB may be jumping the gun to limit quantitative easing.

Dollar continues to struggle on dovish Fed

The greenback lost ground across the board on Wednesday, losing 0.15% against the pound and 0.45% against the euro ahead of the release of the US Fed meeting minutes. Prior to the Fed minutes, JOLTS jobs data echoed the recent non-farm payroll numbers, falling by 88,000.

The prime focus for the day was the release of the minutes from the most recent Fed meeting, which the market interpreted as mildly dovish. Fed members had an extended discussion of the future path of rate hikes if inflation failed to rise, with many expecting a slowing of hikes if inflation continued as it currently stands.

Today we have the release of weekly jobless claims, which are expected to perform in a similar fashion to yesterday’s JOLTS data, falling 9,000, which could see yet more pressure applied on the greenback.

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