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Impeachment inquiry strengthens dollar

26th September 2019 Market Update

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🇬🇧 GBP –  With no data out for the UK yesterday, the pound fell 1% to 2 week lows against a basket of currencies including the euro and US dollar. The drop could be linked to the fact that UK seems to be caught up in a never ending limbo, possibly deterring investment in the pound. The move down also ceded gains made on Tuesday follow the Supreme Court’s ruling against Prime Minister Boris Johnson.

Another quiet day in the economic calendar could spell trouble for the pound, which can suffer when no supporting data is released. Bank of England’s Cunliffe is due to speak at 14.45 which could see some movement. As the governor for financial stability, any forward guidance he gives may encourage or deter investment in the pound today.

🇪🇺 EUR – Euro dollar broke below 1.10 yesterday, while strengthening against the pound to reach highs of 1.1257.

Again, there was not a lot by way of data, however a damning Barclays forecast released yesterday suggests that the current stability in the euro will come to an abrupt end next year, bringing it to a two year low. Growth in Europe has been lacklustre of recent, and the ECB appears to be running out of tricks. There is speculation though that the ECB could be looking to renew stimulus, and Germany’s appointee to the ECB resigned in response to growing momentum behind more stimulus. Lautenschlager’s resignation shows the deep divisions within the ECB at the moment, and the dilemma facing the single currency.

🇺🇸 USD –  Dollar was king yesterday, trumping most major currencies. Investors are still struggling to make sense of US President Donald Trump’s mixed signals on a trade deal with China, but it looks this the USD is still the favoured safe haven currency. Data wise, new home sales were up in the states, possibly supporting the currency. Looking ahead, it is a bit busier today, with a raft of data out from the US including GDP which is expected to stay flat at 2%.

 

Summary:

GBP: Sterling is under pressure, as the Supreme Court ruling increases political uncertainty
EUR: Germany’s ECB board member quits, showing the deep divisions within the ECB
USD: Dollar strengthens as impeachment enquiry launched by Democrats


 

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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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