GBP: Any more reasons to rally?
Sterling recorded its best quarterly performance in nearly three years during Q1 of this year. It’s a well-deserved rally when you consider the progress on Brexit and talk of imminent rate hikes.
However, this morning’s UK manufacturing PMIs is a reminder that the economy is not exactly booming. In fact, the construction sector is in recession and large swathes of retailers and restaurants are struggling to stay afloat.
Tomorrow we get the all-important Services PMI. Services represent two-thirds of the economy, so it will be a good test for Sterling’s strength.
EUR: Reassuringly dull
The EU has done well so far to stay out of Trump’s ‘trade wars’. It’s giving the Euro a newfound safe-haven status.
The gains from geopolitical rotation helped offset a poor showing yesterday from German retail sales which came in quite a bit lower than expected. It’s the latest in a series of surprisingly soft German data.
This morning we’ve also seen the EU’s latest inflation reading (Consumer Price Index) come in less than forecast. Yet more evidence that the European Central Bank can sit back and do nothing.
USD: Tit for tat
Trade tensions between the US and China continue to be the main event in global financial markets.
Yesterday a rebound in the Dow Jones helped bring some confidence back but it looks to be short lived.
Today China has announced a raft of retaliatory tariffs with plans to impose up to 25% tariffs on 106 American products.
And you can probably guess what’s going to happen next…Trump will come back even harder. For now this escalating battle between the world’s two biggest economies will overshadow any near-term economic news. In terms of currency markets, this will weigh on the Dollar and lead to greater risk aversion with emerging market currencies also set to be hit.
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