Good morning,

Following a tentative day of trading yesterday with very little impactful data, the markets are primed for a big week ahead with the UK front and centre today.

The Tory leadership announcement, expected at around midday today, will likely see Boris Johnson take the helm, which would result in British Chancellor of the Exchequer, Hammond, to resign under the requirement of no-deal support should it come to this.

The downside risks for the pound today weigh heavy, as markets will see how much the outcome has been priced into the rate yesterday.

The USD advanced modestly yesterday, with the markets beginning to unwind the more aggressive positions taken around the Federal Reserve rate cut, with a 25 basis point cut seeming the more realistic outcome. This, coupled with Donald Trump’s announcement to suspend the US debt ceiling, gave USD a strong day with UK politics and European Central Bank discussions in the crosshairs.

The euro remains uninspired ahead of the European Central Bank meeting on Thursday. Although it’s likely that the meeting will act as more of a precursor to the September meeting, any guidance on the quantitative easing restart is likely to impact the currency, with the EURUSD pair under some pressure opening below the 1.12 mark this morning amidst yield disparity concerns.

Volatility lies ahead today, with directional momentum yet to be decided. For anyone with GBP exposure that is unsure of how to incorporate this volatility into their business planning, we suggest reaching out to your account manager to discuss option on 0207 326 9120.

Have a great day.

Author: Ross Hammond, Senior Corporate Account Manager