Sterling can’t wait for this week to end!
Of late we have noticed periods of heightened volatility and rallies followed by times of limited price action and consolidation with sideways trading on the Majors. Investors are struggling for clarity and direction as the Euro and Pound are suffering from a potential Brexit, and the US future is unclear. Sterling is suffering in particular – Cable has slumped nearly 3% since last Friday.
Yesterday was a relatively flat day with no great surprises in Eurozone CPI releases. The headline CPI rose to 0.3% in January against expectations of 0.4%, and Core CPI fell in line with the market consensus, up 1.0% YoY. GBPEUR opened at 1.2646 and traded relatively flat for much of the day, before opening this morning 0.2% higher at 1.26715.
The Euro followed a similar pattern against the Dollar. The pair opened at 1.10133, before falling to find support at 1.09867 following better than expected US Durable Goods data. However, the single currency clawed those losses back and opened this morning at 1.1018.
With no Eurozone data releases of note today, all eyes will be on the G20 meeting of the world’s top finance ministers and central bankers in Shanghai.
Sterling takes a back seat today with an empty UK data docket. The Pound has since had a minor recovery from its seven year low against the Greenback, as fears of a downward revision in the Q4 GDP reading did not materialize and the reading stood at 0.5%. However, the fightback may not be sustained and the GBPUSD price will be dictated by US GDP out later today. Cable opens the day still below 1.40. Against the Euro, the Pound remains down following Boris’ bombshell that he supports the Brexit last Sunday. Ongoing uncertainty is likely to sustain this downward pressure on Sterling in the short term, while a consumer confidence reading down from 4 to 0 suggests Brits are not confident about the current economic situation in the country.
At midday, the US GDP and Personal Consumption levels might provide some fresh data from the US domestic market and help clear the Dollar’s outlook before traders start closing positions for the weekend. With Annualized Q4 GDP expected to fall from 0.7% to 0.4% and Core Personal Consumption Expenditure for January expected to drop from 1.4% last month to 1.2%, risks to Dollar buyers lie with a surprise positive figure being printed.
Data to watch: 1pm German CPI (YoY & MoM). 1.30pm US GDP (Q4). US Goods Trade Balance (Jan). 3pm US Personal Consumption Expenditure.