Good morning,
A round-up of yesterday’s action saw the pound find its lowest level in three weeks following a poor PMI data release instigated drop in the morning, with the momentum being carried by Boris Johnson’s threats to dispel any conservatives who would vote to block a no-deal Brexit.
GBPEUR broke 1.10 key level, with GBPUSD cracking the 1.21 mark, down 0.7% on the day.
Overall sentiment around the pound has been very up and down, with no real logic behind the moves, and overwhelmingly driven by political outbursts and announcements. From a statistical perspective, the pound has dropped 4% since Boris Johnson took the helm as Prime Minister, whilst some would argue that arrangements with Europe have softened around the Irish backstop since then. In times like this, statistics don’t lie and it’s with this that markets will look to price in future movement.
Amongst a flurry of purchasing Manager Index data released yesterday morning, key effectors were, obviously, the UK with a kick start to the pound depreciation seen, and Swedish figures surprising on the upside – driving the SEK up against all majors.
Today, the calendar will likely settle in the shadow of politics, with some late afternoon PMI data coming from the US. As US markets return this morning after Labour Day weekend, we should expect the dollar activity to pick back up, with US/China developments continuing in the forefront. Markets expect further escalation with firm stances on both sides very evident. Until officials can agree on the next date for schedules discussions, no real developments are expected in the near future.
On the Brexit radar today, the pound will react to the outcome of whether a no-deal gets blocked in parliament this evening, and thus Boris Johnson’s commitment to a general election on 14th October as a result. Having seen market reactions yesterday to the prospect, we could very well see a heavier downside, with an increasing possibility of a labour led Government and a less appealing British investment market.
As of this morning, GBPUSD and GBPEUR open at 1.1970 and 1.0940 respectively.
Have a great day.