Good morning,

USD: ‘Totally Destroy’

In a world in which politicians are often chastised for not saying anything, Donald Trump is beating a path for the straight shooter. Market’s largely ignored his speech to the United Nations General Council yesterday but his assertions that he would have to “totally destroy” North Korea should the US be forced to defend its itself or any of its allies certainly grabbed its fair share of attention and headlines. Asian FX has been quiet overnight with regional currencies gaining slightly on the US dollar.

The Federal Reserve meeting concludes today and we will receive the latest rate decision and accompanying statement at 7pm.

GBP: Brexit means Boris

The political sideshow that is Boris Johnson once again came to bear on the pound yesterday as a Telegraph report that the Foreign Secretary would resign should Theresa May not listen to his Brexit demands hit the wires. GBP rallied on the news which may hurt the BoJo ego but is seen by markets as an indication that one of the three arch-Brexiteers (Johnson, Davis and Fox) is not long for this world and that without his influence, a longer transition deal may be possible.

Of course, this could all be piffle and rubbish as the Member of Parliament for Uxbridge would say, but the break within the cabinet highlights Theresa May’s speech in Florence on Friday. This could be a speech that is set to reinvigorate the government’s efforts on Brexit and win out a decision from the EU to start talking about trade. May has just spent a couple of days in Canada talking about trade with PM Trudeau following the signing of the EU-Canada Comprehensive Economic and Trade Agreement so the benefits should be front and centre.

The PM is also due to address the UN General Council later today.

We receive the latest round of UK retail sales this morning at 09.30. Previous figures have confirmed the squeeze on real incomes and recent news from retailers (John Lewis, Next) have done little to assuage our concerns.

EUR: Sources not yet trusted

Sources from within the European Central Bank yesterday suggested ECB policymakers are at odds over whether to set a definitive end date for their bond-buying programme when they meet in October, meaning there is a chance that they will keep open at least the option of prolonging it again. Euro is back above 1.20 against the USD and decidedly off the lows against the pound.

The Day Ahead

A lot of markets will be on hold until we know just what the Federal Reserve’s latest thoughts on the US and world economies mean. We expect sideways trade on the major crosses to continue.

Have a great day.

Jeremy Cook, Chief Economist