Pound V euro: GBP enjoying safe-haven demand as Trump responds to North Korea
POLITICAL tensions, combined with a lack of domestic data, is keeping pound sterling on the rise against the euro this morning.
President Trump: North Korea will be met with fire and fury
GBP/EUR has climbed 0.3 per cent to €1.108 as investors look for secure assets amid escalating tensions between the United States and North Korea.
President Donald Trump told journalists last night that he is not prepared to tolerate any more threats from Kim Jong-un.
Speaking in New Jersey, President Trump said: "North Korea best not make any more threats to the United States.
GBP/EUR has climbed 0.3 per cent to €1.108
"They will be met with fire and fury like the world has never seen."
They will be met with fire and fury like the world has never seen
His comments come in response to speculation that North Korea has developed a miniaturised nuclear warhead capable of fitting onto one of its current intercontinental ballistic missiles, meaning targets across America are now within striking range.
Markets are flocking into safer assets and the pound is enjoying strong demand despite the long-term uncertainties on the horizon as Brexit draws closer.
In terms of the balance of risks, sterling’s downside potential is smaller than the US dollar or the euro, as the latter face well-defined threats.
'North Korea best not make any more threats to the United States' said Donald Trump
For the euro, a continued dovish stance from European Central Bank (ECB) monetary policymakers, including President Mario Draghi, continues to be of concern for markets.
Additionally, fears that the strong euro is weighing on economic recovery in the currency bloc has also given markets pause for thought.
German export data released yesterday showed an unexpected decline of -2.8 per cent on a seasonally-adjusted basis in June; economists had expected growth to slow to 0.2 per cent from 1.5 per cent in May.
This could be a sign that euro strength is hampering export orders - the euro is currently at a near-seven-year high against the pound and a two-and-a-half-year high versus the US dollar.
Meanwhile the US dollar - one of the world’s safest currencies - is being avoided due to the potential for the nation to become embroiled in conflict.
With the threat of nuclear war, combined with weak inflation data from China, high-risk commodity-correlated currencies like the Australian dollar, New Zealand dollar and Canadian dollar are being deserted.
Markets are flocking into safer assets and the pound is enjoying strong demand
This is leaving the pound as one of the few attractive buys this morning, with demand for sterling also helped by the fact that UK government bonds are a very safe haven for concerned investors.
Sterling is weakening against the world’s premier safe-haven currencies - the Japanese yen and the Swiss franc.
Geopolitical fears could continue to be the dominant driving factor for GBP/EUR exchange rates tomorrow, although if markets have calmed down the data slew expected from the UK means that volatility is still likely.
Industrial and manufacturing production, construction output and trade balance data for June will be followed by the National Institute for Economic and Social Research (NIESR) GDP estimate for July.
There is no notable Eurozone data set for release.