Data dripping through but quieter week for currency markets leaves Sterling and Euro vulnerable

• Data dripping through but quieter week
• US data will be watched keenly
• Employment data important for Australian Dollar this week

Your weekly currency news from the Halo Financial team

While the usual data has been dripping through, there are no key central bank meetings or announcements this week, as some form of policymaker summer break takes place. So the focus remains on what economic data is available, combined with the geopolitical forces that are moving the markets. Trade and political tensions are making more of an impact than data and fears of global slowdown and recession are spooking the markets: the US-Sino trade war has implications for all currencies and global markets; and no deal Brexit concerns are chipping away at confidence in the UK and the Eurozone.
 
One whiff of bad news is more than enough to weaken the Pound, in particular, which is struggling to strengthen even when positive economic results are released. Positive consumer price inflation and wage growth results were still eclipsed by Brexit fears, as concerns about a no deal Brexit increased on the apparent stalemate between the UK and EU on further negotiations. Agreeing a deal before the deadline is looking less and less likely.
 
There may be some certainty ahead once the UK Parliament reconvenes in early September, especially if a general election is called, but there are still many unanswered questions, such as will this lead to a second referendum? With this continued uncertainty, the Pound will tread water until anything more solid appears on the horizon, bobbing down whenever any negative news appears. Disappointing Gross Domestic Product (GDP) figures for both the UK and Eurozone are also adding to European economic worries.

US data will be watched keenly

Inflation data for the US and the latest retail sales figures expected later this week will all be good indicators of central bank activity at the Federal Reserve’s next meeting in September. Markets are pricing in an interest rate cut, but currently nobody is sure by how much. This will be driven by signs from the latest economic data and the tone and direction of rhetoric to come from the next meeting. The apparent need for a rate cut comes from the ongoing trade tensions and concerns about the health of the global economy. There are some market analysts warning of signs of a US recession, despite the US economy generally being in a good place currently. But the Federal Reserve has seemed reluctant to drop rates again in a hurry and have spoken about this in the context of a more cautious approach to monetary policy. Gently does it…

 
Employment data important for Australian Dollar this week

There will be key jobs data for Australia on Thursday this week, too, which is expected to remain much the same. The Australian central bank has had to cut interest rates several times at recent policy meetings as concerns about the outlook for the Australian economy continue. Another rate cut could help the Australian Dollar, along with any positive data to come out of the coming weeks. The effects of Chinese economic performance and the US-China trade hostilities will continue to affect the Aussie Dollar and its commodity currency cotemporaries.