Good morning,

The pound continues to rattle between relatively tight trading zones against both the EUR and USD, as a lack of any negative Brexit headlines this week has allowed GBP to hang off from any further substantial drops. However, with no positive developments, the bearish sentiment remains ever-present, with pound downside a very real concern as we approach 31st October.

Key headlines in movement yesterday circle around the NZD and the AUD. The Reserve Bank of New Zealand surprised markets with a larger than expected cut of 50 basis points, reducing to a 1% interest rate. The actions are seen to be getting ahead of global slowdowns and a defensive stance around the US/China trade war implications.

This directly impacted the AUD with markets anticipating similar action from Australia over and above the expected cuts initially priced, resulting in a ten year low against the USD.

Over in the US, the closely watched two and ten-year treasury yield curves approach the inversion point, 11.5 basis points away, which tends to be a strong precursor to an impending recession.

This topic has been debated greatly this year and, regardless of its signalling accuracy, will continue to inject further concern into the US market. The dovish Bullard of the Federal Reserve, of course, came across more hawkish in discussions yesterday – just to keep markets on their toes.

The storm brewing between the US and China and the implications on their currency strength are likely to continue weighing on central banks around the globe, with defensive actions already beginning to seep through. Data will be under close scrutiny with economic health moving to the front of markets concerns.

With no substantial data releases today, it will be another opportunity to defuse from yesterday’s action and prepare for the end of the week’s releases.

Have a great day ahead.

Author: Ross Hammond, Senior Corporate Account Manager