- Eurozone voices Brexit concerns
- Australian and New Zealand Dollars under pressure
- Buyers of New Zealand Dollars watching closely
- US Dollar riding the trade war wave
Sterling has been suffering recently in the face of continued Brexit uncertainty, trade war threats and economic concerns. The Pound plummeted again last week as UK inflation data disappointed and retail sales slid. However, the Pound regained some strength as the situation in the UK government seems to have settled with prime Minister May putting her foot down.
There could be a silver lining ahead for Sterling as economic data shows signs of recovery. Lending indicators are looking more positive and the housing market is also showing signs of improvement. Meanwhile, geopolitical factors elsewhere in the world are weakening the Pound’s main currency partners, with the Euro and the US slipping on their own economic and political worries, including Brexit.
And speaking of Brexit, the new UK Brexit Secretary, Dominic Raab, has begun his new role in earnest. Markets will be keeping a very close eye on developments with the negotiations, and this is likely to have more of an effect on the Pound’s fortunes than any data release in the weeks and months to come.
Eurozone voices Brexit concerns
European concerns over their end of the deal with Brexit are being discussed, alongside a series of key business and economic climate indices. Concerns over the economic future of Germany, the Eurozone’s largest contributor, are also being raised. The Euro remains under pressure as a result. Economic data is not providing much support for the Euro, either, with Purchasing Managers’ Indices (PMI) and various other key economic results falling short.
All eyes now rest on the European Central Bank’s (ECB) interest rate announcement on Thursday 26th
July, but, drawing on the cautious tone from the June meeting, it’s unlikely that interest rates will change at this one. The Euro could weaken further on a similarly cautious meeting.
Australian and New Zealand Dollars under pressure
Over in Asia Pacific, the Australian and New Zealand Dollars have been feeling the pressure of economic performance and international trade developments.
Australian consumer inflation is lower than anticipated and the Reserve Bank of Australia is likely to keep interest rates low for quite a while yet. This, along with slower economic performance in China, Australia’s major trade partner, has weakened the Australian Dollar. This comes in spite of far better than expected employment growth data in Oz.
Buyers of New Zealand Dollars watching closely
The New Zealand trade balance slipped further into deficit in the latest figures and, although strong export demand remains from key trading partners such as China, this is not good news for the New Zealand Dollar.
Japanese Yen strengthens
At the same time, the Japanese Yen has strengthened off the back of further monetary stimulus and because the Yen tends to be bought by investors when global tensions are high and, with the US President tweeting new threats almost daily, tensions are very high right now.
US Dollar riding the trade war wave
The US Dollar has been moving up and down in waves recently, most recently falling on rising commodity prices and concerns about the effects of trade wars on the US economy, a fear voiced by the Federal Reserve. The Dollar negativity is somewhat counterbalanced by sporadic positive economic data.
Canadian Dollar pushes higher
Near neighbour, the Canadian Dollar, has strengthened slightly as the US Dollar weakened, but concerns for the Canadian economy remain, as the trade wars grow more heated each day. With Canada’s economy depending on exports, trading relationships are key to a healthy Canadian economy and currency. Ongoing North American Free Trade Agreement (NAFTA) uncertainty is also casting a shadow over Canada and its trading future. Discussions continue…
With much of Europe still in the thick of a heatwave, today’s Wednesday Wisdom focusses on staying cool under pressure.
“Courage is grace under pressure.”
“They sicken of the calm who know the storm.”