A bad week for pound which set for its worst week since October as Brexit fog descends. Euro set for biggest weekly drop in four months as data showed an economic slowdown in Europe was spreading.
The common currency consolidated at a two-week low in subdued trading. Some traders said large buy orders around $1.13 offered support.
The European Commission cut its growth and inflation forecasts on Thursday. Downside surprises to German and Spanish industrial orders fueled worries about an accelerating slowdown. That data has weighed on bond markets; core government bond yields in Europe are at their lowest in over two years. Benchmark German yields are just 10 basis points away from zero percent.
Anxieties about the global economy were also compounded by comments from U.S. President Donald Trump. The US President said he did not plan to meet with Chinese President Xi Jinping before a March 1 deadline to achieve a trade deal.
That helped the perceived safe-haven currencies such as the Japanese yen and the Swiss Franc hold up against the dollar.
START TRADINGForex – Commodities – Bad week for both sterling and euro
With China out for holidays this week, market volatility has fallen. Investors have taken stock of the opening weeks of the year. Most of the consensus trades at the end of 2018 incurred losses.
Going into 2019, the dollar was expected to weaken, especially against the euro and the yen. But so far, it has gained more than a percent against the euro and been flat against the Japanese currency. The dollar failed to make the most of the euro’s weakness, however. It traded a shade higher against its major rivals as trade tensions remained dominant.
Despite the weak data, traders were unwilling to sell the euro aggressively below $1.13. After hitting a low of $1.1323 on Thursday, the euro ended the day at $1.1338. It was stuck around that level on Friday.
Sterling was marginally lower at $1.2941. Traders expect the pound to remain volatile because of the uncertainty surrounding Brexit. The pound was volatile on Thursday. It fell after the BoE kept interest rates on hold and then strengthened when the central bank said rates will rise if an EU divorce deal is done.
The pound fell 0.2 percent to $1.2935, after dropping as low on Thursday as $1.2854, a two-week low. It has lost over 1 percent of its value this week. Against the euro, it traded flat at 87.56 pence.
China’s financial markets are closed all week for the Lunar New Year holiday. Other Asian markets are also closed for parts of the week, keeping wider market activity subdued.
Sources: Reuters, Investing, CNN money
PLEASE NOTE The information above is not investment advice.