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Sterling still suffering; Turkey remains in the limelight

Today’s macro highlights:

  • EUR – GDP second print (Q2)

  • GBP – Claimant count rate (July)

  • GBP – Average weekly earnings (June)

With no economic data out of the major economies on Monday, the ongoing rout in emerging markets continued to unsettle global markets, with the Lira hitting a new record low. Investors remained in risk off mode, boosting perceived safe havens like the dollar. In Europe, some news headlines provided a bit of relief for the Euro as the Turkish central bank intervened in markets and rumours that the US pastor could be released soon (subsequently denied by authorities). With the Turkish president adamant that interest rates will not rise to curb the depreciating currency, this relief is unlikely to be sustained. In the UK, lingering concerns about a “no deal” Brexit and ongoing dollar strength meant Sterling remained at multi-month lows against the dollar.

A slew of UK employment data is due for release at 09.30 BST. Expectations are for continued strength in the labour market, so it would have to be a really positive upside surprise to support the Pound. It is more likely that Brexit fears continue to outshine any good economic data reports.

Over in Europe, the preliminary estimate of German GDP growth was released at 07.00 BST and showed an acceleration from last quarter and but the yearly estimate (seasonally adjusted) missed expectations. The Euro was relatively unfazed by the releases. Meanwhile the second estimate of Q2 Eurozone GDP is scheduled for 10.00 BST.  It is widely held that the figures will be slightly worse than the first estimate. The Eurozone’s highly respected ZEW economic sentiment survey is also due for a revision this morning. It is expected to have declined compared to the previous month. Any meaningful deviation from expectations will provide short-term direction for the Euro, although the more likely scenario is that the common currency continues to be buffeted by the winds emanating from Turkey. 

GBP/USD

The pair remained at multi-month lows during the day. With an increased probability of a “no deal” Brexit and no interest rate rises on the horizon any time soon, the Pound struggled to make headway against a strong dollar, which continues to benefit from its safe haven status. Economic data due out today may prop up Sterling, but the more likely scenario is that the currency continues to trade on Brexit developments.

EUR/USD

EUR/USD remains under pressure although some relief has been provided by recent news headlines. There may be some short-term direction provided by today’s economic data releases, but overall it is more likely that the Turkish crisis will underpin the pair’s movements this week.

GBP/EUR

Sterling continues to outperform the Euro, as the UK is seen as less exposed to Turkey than Europe and benefits from somewhat of a safe haven status when Europe is under pressure. It’s not anticipated that this week’s labour market and inflation data will have much of a meaningful or sustained impact on the currency so the EU/UK Brexit negotiations is something to watch closely.