Trump uncertainty weighs on Dollar, Euro hits fresh highs

Elsewhere, Sterling continued to edge towards the 1.30 level against the Dollar off the back of broad weakness in the greenback. Investors also viewed yesterday’s labour report as mostly positive for the UK economy and we saw a modest bounce in the Pound off the back of its release. Earnings growth fell to a disappointing 2.1% excluding bonus, although the 42 year low level of unemployment continues to underline a broad tightening in labour market conditions.

The 1.30 mark for GBP/USD is looking like a major resistance level at the moment and it may take a fairly significant piece of economic or political news on either sides of the Atlantic before we see this level breached. Today’s retail sales data could test this level if we see a significant surprise to the upside.

GBP

The Pound rose to its highest level in almost eight months on Wednesday, with concerns surrounding Donald Trump’s Presidency the main reason for the bounce in Sterling.

Traders mostly overlooked Wednesday’s weak earnings data in favour of the impressive unemployment rate. Wage growth is now comfortably lagging behind inflation for the first time since 2014, boding ill for consumer spending in the UK in the coming months.

This morning’s retail sales data will be released at 9:30am. Sales are expected to come in at around 2% year-on-year, which would mark a modest improvement on the March numbers.

EUR

Recent Dollar weakness and growing political optimism in Europe continued to improve sentiment towards the single currency on Wednesday. The Euro has now risen by almost two-and-a-half percent since around mid-Friday trading last week.

President of the European Central Bank Mario Draghi will be the main draw in the Eurozone this evening when he speaks at a conference in Israel, although we don’t expect any market moving comments. With investors keen to gauge the possibility of an easing in stimulus measures from the ECB in 2017, communications from the Italian are likely to take on added importance in the context of EUR/USD in the coming weeks.

The ECB’s monetary policy meeting accounts may also receive some attention this afternoon when released just after midday UK time.

USD

Concerns over the future of Donald Trump and his fiscal stimulus measures sent the Dollar to a fresh six month low against its major peers yesterday. The Dollar index has now extended its losses to almost 6% since the beginning of 2017.

Economic news was very limited in the US on Wednesday with investors awaiting next week’s Federal Reserve meeting minutes. Federal Reserve member Mester will be speaking in the US this afternoon. Jobless claims will also be released and are expected to remain around the 240k level.