Good morning,

Yesterday the pound held true to its tight grip on political announcements with a volatile day sporting a 1% trading range on the dollar and euro.

Late in the day, details were leaked of Johnson’s proposal plan, with the reception of some details not well received by Ireland who condemned it as “concerning” and not looking like a basis for a deal. This has brought us back below the 1.23 mark yet again versus the USD, and GBPEUR sits where it has for the past week or so – in the mid 1.12’s. It doesn’t seem as though we will move out of this trading range until there is some real clarity on the route forward.

Johnson will speak today at midday about his “ultimatum”, which consists of his terms being negotiated within nine days or else leaving without a deal. Expect another volatile day with trading on sentiment, as the reception of this final offer will be a significant factor in the forecasting of the pound. If the ultimatum is not received well, Johnson is insistent on breaking off talks, while the EU would aim to “close the gap”. The focus will no doubt be on the Irish border and the proposed customs controls between Northern Ireland and the Republic of Ireland – a real last chance saloon feel.

On the data front today, Swiss inflation fell this morning despite being slightly overshadowed by the UK’s political escapades. The US PMI data released yesterday read weak, spreading tremors in the US market with the odds of a rate cut from the Federal Reserve now increasing. The US ADP employment reports will be released this afternoon at 13:15, with markets expected to pay close attention in anticipation for the non-farm payrolls at the end of the week. We will be watching closely for a bearish narrative circling the USD at the moment.

Have a great day.

Author: Ross Hammond, Senior Corporate Account Manager