19 August 2019
The pound continued its recovery on Friday as it built on gains following a series of better than anticipated data releases over the course of the previous three days. For now, no-deal Brexit concerns have been put on the back burner. However, with just 2 ½ months until the 31st October leaving date, pressure on sterling is sure to return as PM Johnson continues on a Brexit path at any cost while the opposition remains fragmented.
The euro underperformed for the majority of last week and Friday was no exception. A contracting economy and a sharp decline in investor sentiment along with the almost certain prospect of accommodative action from the ECB are weighing heavily on sentiment towards the single currency.
After the midweek fallout from inverted yield curves, risk sentiment stabilised on Friday allowing the dollar to make headway against the yen and Swiss franc which had been beneficiaries of the original anti-risk flows. Despite stronger than expected inflation and retail sales data over the week, financial markets continue to fully price in another Fed rate cut next month so it could be difficult for the dollar to retain favour. The annual Jackson Hole Symposium kicks off on Thursday where we are likely to see fresh guidance from the Fed to either support or oppose another cut.
Data and events
Eurozone inflation is the only release of note today. Inflation is expected to have fallen by 0.4% over the month but to have held steady on both headline and core readings over the year at 1.1% and 0.9% respectively.
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