Good morning,

GBP: Fresh monthly lows

Sterling is trading at its weakest in over a month against the US dollar this morning. Once again, this seems to be as much a function of a strong dollar as a weak pound.

Brexit news is still thin on the ground with the Conservative Party continuing to work out whether they can change the rules and ask for another vote on a confidence motion in Theresa May’s leadership. The irony is not lost on those within the political bubble who are angling for a second referendum on the UK’s decision to leave the European Union.

The news that the Treasury has also set a date of January 31st as the last day of Mark Carney’s tenure as Governor of the Bank of England has also knocked sterling this morning. The damage comes not from doubts over who will be in charge after the Canadian but that another part of the machine that has kept the UK and its financial sector and system operating through all of the back and forth of Brexit will no longer be present.

EUR: Can we hold on?

The main data points come today and tomorrow for the European single currency. This morning’s German IFO release is a closely watched sentiment indicator of German business and has a good correlative relationship with the euro; as the IFO goes down, so does the EUR. If the read-out of future expectations increases from the month before then that should be enough to arrest the euro’s slide, although, a lot like in the case of the pound, half of the reason for euro weakness is sterling strength.

While UK parties are announcing their candidates for the upcoming European elections, those in Europe are as well with particular focus falling on the more populist elements.

USD: Ever stronger

Wherever you look, there are stories that support the case for a stronger USD. The earnings picture from US corporates was strong yesterday with more to come today as well: good demand for US debt ahead of Japan’s ‘Golden Week’ holiday and softer demand for European debt all allowed for another day of USD strength.

While there is no US data of note today – apart from those earnings releases – the continued belief that the risk around the US/China trade negotiations is lessening should also offer support for the dollar.

As we walk in this morning, the USD on a trade-weighted basis is close to a six week high.

AUD: May Day

The odds of a cut in interest rates from the Reserve Bank of Australia at their May meeting are growing every day. Markets are always going to be watching the latest inflation release closely and misses on both headline and core inflation rates suggest that the Australian economy is slowing to a point that necessitates a round of monetary stimulus from the central bank.

The probability of a cut at the RBA meeting on May 7th has now risen to 56% from 14% a week ago. AUDUSD is testing the 0.70 level this morning and looks more than likely to continue its drive lower in the coming sessions.

Have a great day.