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Gloomy May Pours on Sterling

8th May 2019 Market Update

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🇬🇧 GBP –  Sterling lost the gains it made on Friday after Theresa May’s team appeared to be pessimistic over a Brexit accord with the Labour party, shifting talks into unknown territory once again. As a result, David Lidington, Cabinet Office minister, commented that the EU elections will go ahead in the UK on May 23rd. He later added that July 2nd is now the governments new deadline for passing Brexit deal. In addition, the Guardian reported that the 1922 Committee is drawing closer to rewriting the rules to unseat the PM, with the latest unconfirmed reports saying that the committee is deadlocked at a vote of 8-8, so one more defection would be enough to allow a challenge to Mrs May.

The pound hit the highs last seen in March against the euro and the US dollar before hitting resistance levels and dropping back down again.

Talks are likely to resume over Brexit again today and Bank of England deputy governor Dave Ramsden will be speaking at the European Post Trade Conference.

🇪🇺 EUR – The European Commission revealed downbeat growth forecasts for the single-bloc yesterday – forecasted now at 1.2% for 2019 down from 1.9%. Notably the commission slashed German growth by over half, now forecasted to be 0.5% compared to the 1.1% predicted in February. Another notable concern will be EC’s forecasted that Italy’s budget deficit will reach 3.6% of its GDP in 2020 – breaching EU’s limit of 3% in 2020.

German factory orders disappointed coming in at 0.6% versus the 1.4% expected.

However, despite the barrage of negative news from Europe, the euro remained resilient finishing marginally lower on the day.

German industrial production figures are due out today and ECB president Mario Draghi will be speaking in Frankfurt.

🇺🇸 USD –  The dollar was also relatively unchanged yesterday with the only data being the March JOLTS survey revealing that the number of job openings rose higher than expected to 7.49m in March.

The only news due stateside will be Fed’s Brainard speaking in the afternoon and US Secretary of State Pompeo is due to travel to London and meet with PM May.
 

Summary:
GBP: Sterling optimism subsides with Brexit talks breaking down
EUR: European Commission dovish on European economic outlook
USD: Dollar finished unchanged


 

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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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