GBP/EUR – Rising Odds of No-Deal Brexit Drag Down Pound
As MPs pushed back against Theresa May’s latest attempt to secure backing for her unpopular withdrawal agreement the mood towards the Pound soured significantly.
Although May had offered the concession of a potential second referendum if her bill made it through Parliament this was not enough to sway the opinion of MPs across the political spectrum.
With May under increasing pressure to resign and with the odds of a no-deal Brexit rising once again GBP exchange rates entered a fresh slump, falling to multi-month lows against the Euro and US Dollar.
As the Conservative party gears up for a fresh leadership contest the Pound may struggle to regain any of its losses, with political uncertainty look set to limit GBP exchange rate upside for the foreseeable future.
GBP/USD – Pound Dented as UK Households Face Tighter Finances
Although the UK consumer price index failed to pick up as far as forecast on the year in April this was not enough to prevent the Pound trending lower.
As the headline inflation rate clocked in at 2.1%, exceeding the Bank of England’s (BoE) 2% target, domestic wage growth looks set to soften further.
With UK household finances coming under increasing pressure confidence in the economic outlook naturally deteriorated, particularly in the wake of the latest bout of political uncertainty.
GBP exchange rates could lose further traction ahead of the weekend if the UK retail sales data fails to impress on Friday.
Signs that consumers are reining in their spending would add to existing concerns over the underlying health of the UK economy.
USD/GBP – US Dollar Softens as Trade Tensions Persist
While trade tensions between the US and China continued to escalate this was not enough to keep the US Dollar on a bullish trend against its rivals.
Markets remain concerned that the ongoing trade spat could have a detrimental impact on the world’s largest economy, with growth already showing signs of stalling in the face of tariffs.
Even though the University of Michigan consumer sentiment index picked up sharply on Friday USD exchange rates struggled to hold onto a positive footing for long.
Tonight’s Federal Open Market Committee (FOMC) meeting minutes could put additional pressure on the US Dollar if policymakers take an increasingly cautious outlook.
Signs that the Fed is likely to leave interest rates on hold for the foreseeable future, or could even cut rates before the end of the year, would dent US Dollar appeal.
EUR/USD – Rising Eurozone Inflation Fails to Boost Euro
Confirmation that the German and Eurozone consumer price indexes picked up in April was not enough to boost EUR exchange rates last week.
With the European Central Bank (ECB) looking set to maintain a dovish policy bias for the remainder of the year investors took little encouragement from the rise in inflation.
May’s raft of Eurozone manufacturing and services PMIs could see the single currency trending lower on Thursday, as forecasts point towards another lacklustre month of growth.
As long as the Eurozone manufacturing sector remains in a state of contraction any Euro strength is likely to prove limited.
Another set of dovish ECB meeting minutes could equally drive the single currency lower across the board this week.