Sterling shows lack of steely resolve
The market opens with the Pound benefiting from a marginal bid tone, pulling back some of the losses against the Dollar as we trade close to a key level of support. The tone is expected to be relatively muted though as market sentiment continues to trade in a risk averse manner. GBPUSD has now been on a bearish trend for seven trading days, and with only Consumer Confidence out today it’s down to Sterling to manufacture it’s own recovery.
Charles Evans, president of the Federal Reserve Bank of Chicago, noted last night that the best time for a lift-off of interest rates from near-zero level would be the middle of next year. Personal spending in the US beat expectations in August and consumption, the largest part of the economy, is increasing.
Trying to find trends at a time when the main Central Banks are giving mixed messages and little concrete guidance is proving to be difficult for the short term predictions. Pair that with volatile equity markets changing the way that market participants view the value of a currency pair – we are in for a rough ride over the course of the next few weeks at least.
Much of the gains collected by “safe haven currencies” such as the Euro have been gradual and in some cases, muted on an intraday basis. The view for Sterling moving forward is mixed and it seems that outside of key data on the interest rate timeline, inflation, GDP or wage growth front are being largely ignored.
Today, the Pound could maintain the marginal bid tone it started ahead of the European open. Should the Mortgage Approval and Net Consumer Credit turn positive, Sterling will likely strengthen, but on a small scale. Equally, should the release reveal figures that are below consensus or previous data, declines are likely to exceed the upward potential.
In the Eurozone German CPI Figures are expected to show a reduction in the cost of living in Germany, mainly accountable to weak global energy prices. It would seem that the pressure on Draghi to increase the Quantitative Easing programme will keep mounting as inflation figures flounder, especially in Germany, which is the “powerhouse” of the single currency bloc.