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CURRENCY RESEARCH

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Brexit looks to be delayed until October, pound lags

Mon 15 April 2019

The week ahead:

  • Euro zone economic sentiment (Tuesday, 10:00am)
  • UK Consumer price index (Wednesday, 9:30am)
  • US Advance retail sales figures (Thursday, 1:30pm)

Highlights from last week:

  • Brexit delayed until 31st October
  • European Central Bank stands pat on interest rates
  • US inflation firm around target levels

The week ahead - Inflation in focus across majors

There is a raft of inflation figures expected across major economies in the coming week alongside other economic data. With Parliament now in recess, we may see politics taking a back seat to economics over the coming week.

Tuesday will see New Zealand’s inflation figures (11:45pm), Wednesday will see CPI data for the UK, Euro zone and Canada at 9:30am, 10:00am and 1:30pm respectively. Finally, Friday will round off inflation releases with Japanese CPI (00:30am).

Alongside inflation, a survey of economic sentiment for the euro zone (Tuesday, 10:00am) will provide a medium-term forecast of economic health. Composite PMI (an overall measure of purchasing sentiment) figures will be released for both the euro zone (Thursday, 9:00am) and the United States (Thursday, 2:45pm).

Manufacturing figures for the euro zone have trended downwards since 2018, and Thursday’s figures will highlight if this is likely to continue throughout 2019.

Advanced US retail sales figures for March (Thursday, 1:30pm) will provide a clue into US consumer spending as we move into spring.

View UK, US and euro zone announcements with our economic calendar

Other key data releases:

US Industrial production (2:15pm)

UK House price index (Wednesday 9:30am)

Canadian retail sales (Thursday, 1:30pm)

Last week recap - EU summit sees Brexit delay, pound lags

The United Kingdom and European Union have agreed to delay Brexit until 31 October following talks in Brussels.

The UK was scheduled to leave the EU without a deal on Friday, and this agreement will therefore provide further time for MPs to debate what, if any deal should be reached moving forwards. The United Kingdom must now participate in European Parliament elections, and failing to do so will mean leaving on 1st June.

Despite averting the possibility of a no-deal Brexit for the time being, the pound had a muted response to the news, with any initial gains against the euro being quickly erased.

Dealing early on Thursday morning, a transfer of £10,000 via our telephone Currency Service would have purchased €11,145.

European Central Bank holds interest rates unchanged, IMF slashes global growth figures

The European Central Bank (ECB) voted to hold interest rates unchanged on Wednesday in a move that conformed to market expectations. It also reiterated its expectation for rates to remain unchanged at least throughout the latter half of 2019.

The International Monetary Fund (IMF) cut its predictions for world GDP growth in 2019 to 3.3%. This marks a decline of 0.2% since January’s prediction. The support for the cut came from weakening sentiment amongst both consumer and business demographics, and slowing global trade.

Both the pound and the euro were little changed on either release, as the ECB statement saw a reiteration of previous policy.

US inflation rises, falls short of expectations

Core consumer price index figures for the United States showed a gain of 2.0% year-on-year for March.

With inflation holding steady at around the current Federal Reserve target, there is little impetus for any future tightening of US policy. Interest rates may therefore remain unchanged or even possibly lowered depending on future economic data.

President Trump has continued to call for a lowering of rates in order to provide a boost to the US economy, although the independent-acting Federal Reserve has left rates unchanged since December 2018.

The next meeting of the Federal Open Market Committee (FOMC) will begin on 30th April and it is likely that the Fed will continue with its current ‘wait-and-see’ policy.

On Friday afternoon, a conversion of £10,000 to US dollars via our telephone Currency Service would have purchased $12,960.

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