Good morning,

The week begins with the final euro inflation data out this morning at 10:00 BST, with no surprises anticipated from the flash estimates.

The sentiment on the pound this week has, as expected, opened nervously with an abrupt 0.2% drop on GBPUSD and 0.3% on GBPEUR. As we move closer towards the deadline of 31st October, the weight of passing comments and opinions start to bear heavier. Mark Carney’s comment that a no-deal Brexit would cause an “instantaneous shock” and would likely threaten the validity and ability of businesses to continue in operation is a real concern that international businesses will be feeling and, no doubt, aggressively planning for.

To build on the growing fears, a timely leak of an official document on Sunday, “Operation Yellowhammer”, which details the predicted outcomes of a no-deal Brexit has revealed a harrowing reality of the extent of disruption that the UK may see around key fundamental areas. The report details the negative effects on transport delays, medicine supplies, fresh food shortages and the implication that this would have – pressuring price rises. The overall summary is that the UK is not in a prepared state for a no-deal.

With Britain being backed against the ropes by political developments, the US dollar will share this narrative, with the focus this week on the US/China trade negotiations. Positive tweet action from Trump around this may ease the markets as the yield curve inversion is still holding firm in traders’ minds. Any positive development which can take the foot off the accelerator of the global recession fears will be welcomed across the board.

The scope of the downside that the pound may see is likely to be really be tested this week, with predictions and extreme scenario outcomes likely to pepper themselves across the media.

We would advise that if you have currency transactions over the next few months to speak to your account manager this week to discuss potential ranges that your currency exposure may see and get a plan for exchange in place.

Have a great week ahead. 

Author: Ross Hammond, Senior Corporate Account Manager