Good morning,
Yesterday’s movement proved choppy, with a GBP drop in market open, a midday tease at some pound recovery, and the day finishing with a sell-off to drop the GBPUSD back below 1.21 in overnight trading.
Trump tweeted on dollar’s strength and its ricochet effect on global markets, calling for a rate cut of 100 basis points and consideration of quantitative easing.
Although his stance is very clear on the desire to devalue the dollar, markets swayed the other way, with risk diminishing from the trade dispute with China, allowing money to crawl out of the haven assets and back into the stock market and higher-yielding currencies, driving the dollar up.
The euro pushed back on the pound also, with Germany preparing for fiscal stimulus measures to support their economy should it be needed. However, the GBPEUR is unlikely to confidently pick a direction for momentum at this point, with political uncertainty rife on both sides.
Italy will see the confidence vote this afternoon, whilst the UK will go through the movements instigated by Corbyn for a vote of no confidence this Autumn.
Meanwhile, in the background, Gove seems to be desperately pouring water on the fire caused by the leak of Operation Yellowhammer, outlined in my update yesterday, stating that it is “outdated” and that it’s an extreme “worst-case scenario”.
Although the pound is certainly under pressure with a clear bearish weight, it is all relative. As of Monday 12th this month, GBP is up 1% on the dollar and 2% on the euro, highlighting that even in the short term there is an opportunity. It’s therefore crucial to feedback to your account manager your requirements and timeframes, in order to get the support to target and react accordingly to the market trends over the uncertain time period.
Have a great day ahead.