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Could weak German inflation prompt euro slump?

business-articlesCould weak German inflation prompt euro slump?
  • Easing mortgage approvals likely to weigh on pound

  • Euro losses possible on softer German inflation

  • Federal Reserve announcement to provoke US dollar volatility


Pound vulnerable ahead of mortgage approvals data

The mood towards the pound could sour further this morning if December’s UK mortgage approvals data fails to impress.
Another monthly decline in approvals would suggest that UK households are taking a less optimistic view of the domestic outlook as Brexit-based uncertainty mounts.
Any signs of weakening confidence may encourage GBP exchange rates to trend lower across the board this morning as market worries over the underlying health of the economy remain.
A weaker net consumer credit reading could also put pressure on the pound today.

Softening German inflation to dent euro

EUR exchange rates are likely to come under pressure this afternoon with the release of the latest German consumer price index data.
Forecasts point towards a sharp contraction of -0.9% on the month, indicating that inflationary pressure within the Eurozone’s powerhouse economy remains muted.
With the European Central Bank (ECB) already adopting a more cautious policy outlook any fresh decline in inflation may weigh heavily on the single currency.
However, if the annual CPI can hold steady at 1.7% this may limit any negative impact on EUR exchange rates.

US dollar softens ahead of Federal Reserve decision

Demand for the US dollar looks set to remain muted ahead of tonight’s Federal Open Market Committee (FOMC) policy announcement.
There is no expectation for interest rates to rise at this stage, however, limiting the potential for USD exchange rates to gain ground tonight.
Even so, if Fed policymakers indicate a greater sense of optimism this could see the US dollar strengthening on bets of an interest rate hike coming sooner rather than later.
Another dovish message from the central bank, though, may see the US dollar shedding further ground against its rivals.

Upcoming Data:

Wednesday, 30th January 2019

09:30 GBP Mortgage Approvals
09:30 GBP Net Consumer Credit
13:00 EUR German Consumer Price Index
13:30 USD Gross Domestic Product Annualised
19:00 USD Federal Open Market Committee Rate Decision

Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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