Things have seemingly gone from bad to worse for sterling after close of trading in the UK markets yesterday, with key levels of $1.25 and $1.1150 being breached following sentiment that the UK could be heading for a technical recession. At 9.30am, the picture will become clearer as the UK’s manufacturing data and GDP figures are released – any further confirmation of the above could see further falls for the pound into near uncharted levels.
Last night’s leadership election between Hunt and Johnson revealed little with regards to further Brexit policy, as rumours from Westminster continue to swirl with regards to blocking a no-deal departure from the EU. If the rumours begin to materialise into fact, the GBP could get some desperately needed breathing room in the short run as further extensions at this stage look to be too politically toxic, both in the UK and on the continent.
The euro has once again been trading in a stable range on the dollar, with very few meaningful data releases or policy statements of note to discuss, little has inspired the single currency to deviate from its current holding pattern around the $1.1200 mark. However, the further focus will fall back onto the euro over the coming weeks as the economic powerhouse of Europe – Germany – looks to avoid a manufacturing recession of its own, as it reels from being caught in the crosshairs of the ongoing trade spat between the US and China.
The main focus for the USD today will centre around the testimony of Jerome Powell at 3pm GMT. Powell will provide a broad overview of the economy from the Fed’s point of view, before attending a Q&A likely to focus on how severely interest rates are to be cut on the dollar. Trump has characteristically been sniping from the sidelines, as a cheap dollar is fundamental to his plans to export more US-made goods abroad and rebalance trade deficits in tandem with punitive tariffs. It remains to be seen though if Powell will blink, or fight back to protect the Fed’s autonomy. Either way, volatility is assured.
Have a great day.