Good morning,

As I mentioned last week when parliament was still prorogued, when the gates of The Palace of Westminster stay closed – and politicians are quieter – the pound has room to breathe and push on against most major currencies. Yesterday, as if by magic, as soon as Parliament was hurriedly reconvened after the unexpected Supreme Court ruling, the pound duly tumbled 0.55% against the euro to 1.1280 and 1.15% against the dollar to 1.2355.

Whilst nothing new policy-wise has been provided to cause this kind of drop, the pound reaction is more focused on the reactions of the prime minister to questioning regarding asking the EU for an extension to the 31st of January.

The Benn-Burt bill passed through parliament made clear that this was the course of action to be taken should no-deal be on the table by the 31st of October; however, Johnson’s flat answers of “No” to every query on the matter caused some anxiety in the Commons and the pound markets with it.

Across the pond, a scandal is enveloping the White House with regards to Donald Trump seeking to influence Ukraine by withholding military aid unless they smeared the son of his likely 2020 Democrat challenger Joe Biden. Despite the looming impeachment enquiry, the dollar has gone from strength to strength in the background, much to Trump’s disappointment.

A number of officials from the Fed yesterday made comments surrounding further rate cuts through the year – all echoed the sentiment that no more would be made, no matter how many tweets the President sends out it seems.

The dollar’s strength in the short term could be checked by two data releases at 13.30 today and tomorrow, which will focus on GDP and inflation figures – a positive reading could support the continued advance, a negative reading could taper the recent gains.

Currently, the euro has suffered the worst from the dollar onslaught; sliding from its 1.1020 comfort zone right down to 1.0940. The monthly lows of 1.0926 look to be tested in the short run, which, if breached, could see a push towards 1.0890 – levels not seen since 2017.

At open, GBPEUR sits around the 1.1270 mark, as the euro struggles to put up much stubborn resistance against a politically vulnerable pound. GBPUSD is at 1.2335, which is more at risk of downside, especially if the data at 13.30 is positive and Johnson continues to dig his heels in.

Have a great day.

Author: Joshua Haden-Jones, Senior Private Relationship Manager