The pound remains on the back foot after falling to multi year lows against a host of currencies. This downtrend for the home currency comes off the back of hugely increased expectations of a ‘no deal’ Brexit and the possibility of a snap General Election before the end of the year. Parliament is now in recess for the summer therefore there are no scheduled Brexit meetings, however the pound will remain sensitive to any Brexit related comments from any government ministers or Conservative MPs. The main release out of the UK this week comes in the form of second quarter GDP data. Growth within the UK is expected to have ground to a halt due to Brexit related on goings, with a 0% GDP reading anticipated. This release on Friday morning has the potential to move GBP crosses should it differ from the expected outcome.
It could be a quiet week in the Eurozone with only German industrial orders standing out as a possible market mover on the data front. The industrial sector has been very weak recently and with this reading expected to show a recovery in the sector it could lend some strength to the single currency, although probably marginal. Investors are waiting to hear any news regarding future monetary policy by the European Central Bank (ECB) as speculation towards an interest rate cut next month continues. It is now widely expected that the ECB will cut rates next month and even possibly re-introduce Quantitative Easing (QE). Any hint towards either of these could weaken the single currency.
Producer Price Inflation could be a key release out of the U.S. this week. The Fed cut interest rates last month by 0.25% to combat weakening inflation, with this move touted as a one off and not the start of a steady stream of rate cuts. Although this isn’t the headline inflation rate and it is expected to show an increase from the previous reading, should the announcement surprise on the downside it could increase expectations of further interest rate cuts and weigh on the greenback. ISM non-manufacturing PMI data out this afternoon also has the potential to move USD crosses.