General election blocked…. for now

5th September 2019 Market Update

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🇬🇧 GBP –  There were dramatic scenes in parliament yesterday. The day begun with Sajid Javid declaring that the government has “turned the page on austerity”, as the government set out its plans to increase spending across all departments. Normally, this would have been the key political event of the day, however this was not to be case as Brexit once again filled the agenda. Parliament voted through an amendment to block a no-deal Brexit, much to the frustration of Boris Johnson’s government. In response, the prime minister tried to call a general election and dissolve parliament, so Brexit could be delivered by 31st October. He was unable to establish the super-majority needed to call a general election, which was required due to the Fixed-terms Parliament Act. The House of Lords is aiming to ratify the amendment blocking a no-deal Brexit by Friday. Once this has been achieved, Jeremy Corbyn has stated that only then the Labour Party would support a general election. In response sterling rose against both the US dollar and euro, as the risk of no-deal Brexit has been averted in the short term.

🇪🇺 EUR – Mario Draghi faced a raft of scepticism over the need for an immediate resumption of quantitative easing by his fellow colleagues which gave the euro a lift yesterday.
Data this morning has shown that German factory orders fell by 2.7% in July adding to the continuing woes in Germany. As a result the Bundesbank has now warned that it is likely that the German economy will contract in the 3rd quarter, taking Europe’s biggest economy into recession.

🇺🇸 USD –  No big news yesterday from the US but there will be focus this afternoon with ADP employment as well as a raft of service sector figures.
A disappointing figure here will make markets start to ponder if indeed the Fed will cut interest rates this month.

 

Summary:

GBP: MP’s block call for general election
EUR: Draghi faces criticism over forecasted monetary stimulus
USD: ADP employment figures in focus


 

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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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