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The pound continued its run of volatility yesterday with as it dipped towards €1.10 and below US$1.30. In addition to the consistent strength of the single currency and the positive run of data from the eurozone, uncertainties surrounding Brexit continue to weigh heavily on the pound.
Elsewhere, there was some disappointing trade data from Germany and China with imports and exports growing slower than expected. Some economists speculated that this could be a sign of a slowing global economy. However, as far as Germany is concerned, there’s no real cause for alarm just yet, as these figures could simply be a hangover from the good run of German data we have had so far in 2017.
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GBP: sterling slides to a two-week low against the greenback
Sterling made losses against the US dollar but just about maintained equilibrium against the euro. The move was triggered in the afternoon after economic data from the US employment sector was once again more favourable than anticipated. Given the cautious tone from the Bank of England’s quarterly report last week – and the increased probability of an interest rate hike increase in the US – it could be the case that a new downtrend is being established.
Meanwhile, British retail sales grew more slowly in July than June but, as expected, still posted a 0.9% growth. While this is better than a sliding number, it does highlight the reluctance of consumers to spend in these uncertain times.
It is a quiet day for UK economic data tomorrow, but global economic data could still exert some influence on the pound.
EUR: disappointing data from Germany surprises the markets
Economic data from Germany in 2017 has helped support the euro’s consistent strength, but is it possible this has come to an abrupt end?
The main announcement from the eurozone was that import and export data from Germany was lower than forecasts. Imports fell 4.5% while exports fell 2.8%. This represents the biggest drop we have seen since the beginning of 2009 when we were in the middle of the global financial crisis.
As we have alluded to, the day ahead is fairly quiet on the economic data which is entirely in keeping with the theme of the week.
USD: dollar benefits from good jobs data
The dollar shook off some early weakness to strengthen to more than a one-week high yesterday, after data showed US job openings surging to a record high in June.
On Tuesday, the Labor Department said that job openings increased by 461,000 to a seasonally adjusted 6.2 million, the highest level since the series started in December 2000. This reinforces the strong non-farm payrolls data from last Friday, and helped strengthen the dollar significantly. This has led to increased speculation that there could be an interest rate hike before the year is out.
Today sees US crude oil inventories as the only tier data, but the market will watch for further murmurs of any interest rate rise speculation in the US.
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