GBP/EUR – GDP Data Unlikely to See Any Change
Although July’s UK retail sales data bettered forecast the figures nevertheless pointed towards slowing consumer spending, limiting any positive impact on the Pound. With household finances likely to remain under pressure for some time to come this did not bode overly well for the outlook of the UK economy and its reliance on consumers. Even so, with the second estimate of the second quarter gross domestic product expected to show no change this could offer Sterling a rallying point. However, if the underlying details of the report suggest that the economy has entered the third quarter on a weaker footing GBP exchange rates could remain in a bearish mood.
GBP/USD – Pound Softens as Government Outlines Brexit Proposals
As the Conservative government continued to outline its position on key issues in the matter of Brexit this prompted fresh market jitters. Investors are concerned that the UK and EU are still not showing signs of moving any closer to a meaningful agreement, keeping the risk of a hard exit alive. Even though there have been some indications that the government is softening its stance on certain issues it remains to be seen whether this will help to move negotiations forward in the near term. Uncertainty surrounding Brexit is likely to maintain downside pressure on the Pound for the foreseeable future, especially if domestic data continues to disappoint.
USD/GBP – ‘Greenback’ Dented by Diminishing Hopes of Trump Policy Promises
Confidence in the Trump administration’s ability to deliver on promised infrastructure investment and tax reforms weakened markedly over the last week. A steady Richmond Fed manufacturing index offered some measure of support to the US Dollar, although this is unlikely to materially alter the policy outlook of the Federal Reserve. USD exchange rates could receive a strong boost in the coming days, however, if Fed Chair Janet Yellen takes a hawkish tone in a speech at the Jackson Hole symposium. Any indication that the Fed is still on track to raise interest rates again before the end of the year could prompt a fresh bullish run for the ‘Greenback’.
EUR/USD – ECB Policy Speculation Drives Euro Volatility
Demand for the Euro slumped sharply in the wake of the European Central Bank’s (ECB) latest meeting minutes. As policymakers expressed concern over the relative strength of the single currency this detracted from hopes that the central bank could start to taper its quantitative easing program in the near future. With German economic confidence showing signs of weakening the appeal of the Euro remained limited this week, although it found some support from better-than-expected August PMIs. If ECB President Mario Draghi is seen to make any fresh hints as to the policy outlook in his speech at Jackson Hole this could provoke increased volatility for EUR exchange rates ahead of the weekend.