Good morning,
Although we are starting off the week quietly on the data front, the week ahead is a busy one, likely determining market momentum for the remainder of summer, with particular focus on the US Federal Reserve on Wednesday.
The pound opens at a two year low against the dollar with a no-deal Brexit becoming a stronger possibility as we march forward. The cabinet will hold its first meeting today. The pound will remain at the mercy of developing talks and any progress made towards the October 31st deadline.
In the US, the market is well-positioned for a 25 basis point rate cut this week. An unlikely stronger 50 point cut would presumably cause volatility across the major currencies.
Negotiations with China will continue this Tuesday in Shanghai, with no real give on either side expected at this point.
The Japanese yen has been garnering support as the haven currency from the US dollar, and will also see its central bank decide on interest rates on Tuesday. The discussions around economic strength and future policy again will likely be the key driver here for direction.
Emerging market currencies have enjoyed the recent dovishness around the US dollar and the pricing in of the Federal Reserve decision. The rhetoric around the future monetary policy guidance will be key, probably more so than the cut, which is at this point highly anticipated by the market. Any signals of a more hawkish nature may dampen the emerging market currencies.
Have a great week ahead.