Brexit Fears Limit Positive UK Data Impact.

The pound reversed recent trends and gained across the board on Wednesday. Sterling initially edged higher on the back of some positive inflation data for July. Consumer price index rose to 2.1% beating market expectations of 1.9%. However, upside movements were limited and as pound sentiment is largely tied to Brexit fears at present. Normally a rise in inflation would bolster the case for future interest hikes but at present, the market is still pricing in a cut by May 2020.

Across the pound, U.S. Treasury yield curves inverted for the first time since 2007. In short, this indicates investors are able to achieve a higher rate of return on near-dated bonds compared with longer-dated equivalents. Traditionally, such an event has been considered a red flag for a future recession.

Comments from Boris Johnson yesterday indicated that little progress is being made with Europe. Whilst he maintained the UK is on course to leave the EU on the 31st October, he added that the longer the situation goes on, the greater a no-deal outcome becomes. Calling for unity amongst MPs, Johnson warned that if the EU believe parliament can block a no-deal, they will be far less likely to compromise. Unsurprisingly it seems he now finds himself in a position similar to that of Theresa May but with Remainers replacing the role previously played by Brexiteers.

Retail sales will be the main data release this morning for the European session. Focus will then shift to the same announcement but this time from the US followed by some further unemployment data.

Economic Calendar

09:30GBP Retail Sales (YoY) (Jul)2.6%3.8%
13:30USD Retail Sales Control Group (Jul)0.3%0.7%
13:30USD Initial Jobless Claims (Aug)214k209k
13:30USD Nonfarm Productivity (Q2)1.5%3.4%

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.