he Pound was buoyed throughout much of the session from Thursday morning’s solid retail sales data, which gave reason to be optimistic over the health of the UK economy going into the third quarter of the year. But with the Bank of England appearing in no hurry to raise interest rates again and the market growing increasingly concerned over a ‘no deal’ Brexit, the Pound is finding gains hard to come by, and any rally is struggling to be sustained.

With no macroeconomic news out of the UK today, the Pound is likely to be driven largely by external factors.

Easing trade concerns buoy Euro for second day

Over in Europe, the common currency rose for a second day, jumping back above the 1.14 mark as risk appetite continued to improve. Currency traders will be hoping next week’s talks between the US and China can ease trade tensions between the two juggernauts that caused investors to flee emerging market currencies and flock to the safe havens.

Today bodes to be a relatively quiet session in terms of economic news, with major currency moves likely to be driven largely by geological risks. This morning’s revised Eurozone inflation data will be the most significant data point of note, although this is expected to remain unchanged. Investors could turn one eye to next week’s FOMC minutes.

Lira volatile ride continues, capital controls and IMF support ruled out

The Turkish Lira continued to recover ground on Thursday, rallying by around 4% during the London session, albeit these gains were wiped out completely this morning. Currency traders took some heart from a speech by Finance Minister Berat Albayrak yesterday, son-in-law of President Erdogan, who claimed that the country would emerge stronger following the Lira crisis.

The finance minister did, however, rule out the use of capital controls, while saying that there were no plans to seek financial assistance from the IMF, instead favouring tighter fiscal policy to lower inflation. We think that even the combination of government austerity measures and large interest rate hikes from the central bank may be insufficient to rein in inflation and the Lira, and a rescue package from the IMF further down the line cannot be ruled out.

Regardless of what happens next, currency traders will be bracing for more wild swings in the Lira and keeping tabs on the possibility of contagion that could drag other European currencies with it.