ECB holds fire on stimulus measures

26th July 2019 Market Update

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🇬🇧 GBP –  Sterling fell off its multi week highs yesterday after a top EU official pushed back against the Brexit policies of Boris Johnson following his first speech to MP’s. Mr Johnson said he was committed to “getting rid” of the Irish border backstop, a key piece of any potential deal. The EU’s chief negotiator, Michel Barnier, rebuffed this commenting that removing that backstop guarantee was unacceptable and labelled the PM’s speech as “rather combative”.
Barnier then went on to add that despite disagreements over the backstop, the EU was prepared to work constructively within their own mandate.
However, the damage had already been done with markets once again concerned with the fear of a no deal causing the pound to drop off its multi week highs.
No data out today as markets will continue to digest any further Brexit news.

🇪🇺 EUR – A choppy day of trading on the euro yesterday following the ECB interest rate decision and monetary policy statement. The bank held interest rates at -0.4% as was widely expected but volatility soon ensued as the euro hit fresh two-year lows versus the dollar. During the accompanying rate statement, the Bank reiterated its willingness to adjust all of its policy instruments and added that the introduction of new asset purchases was being considered.
Overall the statement itself fell in line with market consensus causing the euro to then rebound back versus both the dollar and the pound.
The euro remains at its weakest levels versus the US dollar since May.

🇺🇸 USD –  The dollar benefited in the afternoon after durable goods orders for the month of June surpassed expectations coming in at 2% in June versus an expected rise of 0.7%.
The dollar index now stands at its strongest levels since the beginning of June as it continues its week-long strength ahead of next week’s interest rate decision.
Today we have the first estimate of growth in the second quarter with the annualised figure expected to come in at 1.8% – a significant drop from the 1st quarter of 3.1%, which would add to Trumps call’s for the Fed to cut interest rates.

 

Summary:

GBP: Sterling drops on “combative” speech
EUR: Increased volatility as ECB holds rates
USD: Dollar continues gains ahead of GDP figures


 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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