Kantox currency update: euro and pound plunge hammered by risk aversion
The US dollar and the Japanese yen have rallied against the euro and the pound as the diplomatic tensions between US and Russia have added concerns to a market sentiment already hit by the commercial tensions between the US and China.
The euro has dropped sharply following a Financial Times report suggesting that the ECB is concerned about the European Banks’ exposure to Turkey, after the collapse of the Turkish lira, while the British pound remains weighed by fears of a no-deal Brexit.
EUR/USD extends decline below 1.1500. Euro recovery attempt from 1.1510/20 was capped at 1.1625 and the pair has dropped about 1.6% over the last 24 hours, to reach prices below 1.1500 for the first time in one year. As at London market opening times, the EUR/USD is trading at 1.1465.
GBP/USD: at one-year lows below 1.2800. The sterling has been falling like a rock this week and has depreciated nearly 3% since last Friday, when trade minister Liam Fox warned that a no-deal Brexit was the most likely outcome. As at London market opening times, the GBP/USD is trading at 1.2785.
USD/JPY: remains steady above 110.60/70. The dollar has remained steady against the yen, trading above support area at 110.60/70 but unable to surpass the 111.50 level. As at London market opening times, the USD/JPY is trading at 110.95.
In the Calendar Today
This morning, in the UK, the Q2 Gross Domestic Product is expected to show that economic growth accelerated in the second quarter after a sluggish start of the year. An upbeat GDP result might help to ease Brexit and trade tension fears and increase confidence in UK economy, which might strengthen the pound.
At the same time, National Statistics will release the UK Industrial and Manufacturing Production. Factory activity is expected to have improved in June, after a weak performance in May, which might be supportive for the pound.
In the US, the market will be attentive to June’s Consumer Prices Index with special interest on the core CPI, which accelerated in June at its fastest pace in six years. If this trend continues, it would add reasons for the Fed to hike rates in September, which would be supportive for the dollar.
08:30 GMT UK: Gross Domestic Product (YoY) (Q2)
Previous: 1.2% Expected: 1.3%
08:30 GMT UK: Manufacturing Production (MoM) (Jun)
Previous: 0.4% Expected: 0.3%
08:30 GMT UK: Industrial Production (MoM) (Jun)
Previous: -0.4% Expected: 0.4%
12:30 GMT US: Consumer Prices Index (YoY) (Jun)
Previous: 2.9% Expected: 3.0%