Pathfinder Market Update July 16th
- The Blog Team
- Jul 15
- 2 min read
The Pound
Its been a gruelling couple of weeks for the pound as we saw a drop of nearly 2 cents against the Euro and more than 3 cents against the Dollar. With UK data showing the economy shrank in April and May, and forecasts suggesting the second half of the year may be equally challenging the pound has come under intense selling pressure.
The Bank of England appear to believe there is enough headroom for a potential rate cut in August with increasing bets of 3 rate cuts this year despite inflation still stubbornly running above the 2% target. With the Government making a rather humiliating U-turn in relation to welfare cuts leaving a rather large black hole in the public finances, it looks like the pounds troubles are far from over.
The Euro
The Euro has continued its winning streak following the last interest rate cut from the European Central Bank (ECB) in June. With inflation now below the 2% target it looks like they are close to the end of their rate cutting cycle allowing the Euro to gain a significant chunk of ground across the board. The trend away from the Dollar as the default reserve currency of choice, in what remains a risk averse market continues to benefit the Euro.
The Dollar
Despite a modest recovery in recent days the dollar remains on the defensive due to a combination of factors. Trump continues to throw mud at Fed Chair Jerome Powell, piling on the pressure for the Fed to cut interest rates further. In addition, Trump’s ‘big beautiful bill’ risks adding $3.3 trillion to the national debt and then there is the continued trade war, with a fresh threat of 30% tariff on imports from Mexico and the European Union starting on 1st August, after weeks of negotiations with the major U.S. trading partners failed to reach an agreement.
A recent surge in Chinese exports suggests the global economy is weathering the storm better than many expected which has provided the Dollar with some respite but with the US facing so many headwinds continued Dollar strength is looking less likely.
Key Economic News Coming Up over the next week - Pathfinder Currency Market Update July
Wednesday 19th
UK - Inflation data
Thursday 17th
US - Retail Sales
UK- Employment Figures
Tuesday 22nd
AUD - Central bank meeting
US - Fed chair speech
The Pathfinder Team
44 (0)1743 290955
Comments