GBP/EUR – Pound Dented by Surprise Retail Sales Slump
Confidence in the UK economy took a fresh blow as March’s CBI reported Distributive Trades Index – an alternative measure of retail sales spending – disappointed forecasts, showing a surprise slump from 0 to -18.
With UK consumers showing increased signs of caution, and with mortgage approvals hitting a near-six-year low, the risk of a fresh slowdown in economic growth has picked up.
This left GBP exchange rates on a weaker footing, given the high levels of uncertainty that still surround the longer term outlook of the UK economy.
If Friday’s GfK consumer confidence index also sees a decline this may put further pressure on the Pound, especially in the face of ongoing Brexit uncertainty.
GBP/USD – Brexit Uncertainty Continues to Dominate Pound Outlook
As EU leaders agreed to a provisional extension of the Brexit deadline to mid-April this helped the Pound to stabilise against its rivals.
With the risk of a no-deal Brexit temporarily easing GBP exchange rates saw limited downside pressure, even as a lack of clarity continues to hang over the future of the UK’s relationship with the EU.
Domestic political tensions continued to weigh on the Pound, with the DUP still unwilling to back Theresa May’s already twice rejected Brexit deal.
Without solid signs of progress towards a resolution of the Brexit situation GBP exchange rates may struggle to find any particular degree of strength in the days ahead.
USD/GBP – Surprisingly Dovish Fed Message Weighs Down US Dollar
After the Federal Reserve surprised investors with an unexpectedly cautious policy outlook the US Dollar has come under pressure.
As policymakers now see interest rates remaining on hold until the end of the year, as opposed to the two further rate hikes previously expected, USD exchange rates naturally slumped.
A surprise decline in March’s US consumer confidence index put further pressure on the US Dollar, with markets increasingly fearful of the prospect of a potential US recession.
If January’s US trade deficit fails to narrow as forecast this could see USD exchange rates extending their recent losses further.
On the other hand, signs of resilience in the finalised fourth quarter gross domestic product data may give the US Dollar a boost this week.
EUR/USD – Signs of ECB Dovishness Keep Euro Under Pressure
The mood towards the Euro continued to sour as German and French consumer confidence indexes showed a decline on the month.
With signs still pointing towards weaker economic momentum within the Eurozone investors saw little incentive to favour the single currency.
Commentary from European Central Bank (ECB) President Mario Draghi gave EUR exchange rates fresh cause for weakness on Wednesday, meanwhile, as he maintained a dovish policy outlook.
As the ECB looks set to maintain looser monetary policy for longer the upside potential of the Euro was naturally limited, with interest rates likely to remain at their current record lows for the foreseeable future.
Unless March’s German and Eurozone consumer price index data surprises to the upside, showing an acceleration in inflationary pressure, EUR exchange rates may struggle to find support in the near term.