10th October 2019 Market Update
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🇬🇧 GBP – Sterling whipsawed in early trading yesterday following conflicting developments with Brexit negotiations.
Sterling initially climbed after the Times reported that the EU was ready to offer the UK a significant concession for deal by providing a mechanism for the Northern Irish assembly to leave a new Irish backstop after a set number of years. However, market optimism soon dried up after the DUP and senior Tory Eurosceptics rejected the EU’s offer causing sterling to lose initial gains, with markets resuming the downward trend on the pound.
On the Brexit front today, Boris Johnson and Irish PM Leo Varadker will be meeting for detailed discussions on further Brexit proposals to see if they can break the deadlock on the Irish backstop.
On the data front we have manufacturing and industrial production figures as well as August’s economic growth figures, with markets expecting growth to be stagnant at 0% down from 0.3% in July.
Unless we see a significant breakthrough in the Johnson-Varadker talks, expect the pound to remain relatively rangebound with 1.22 and 1.11 key support.
🇪🇺 EUR – The euro edged higher yesterday versus the US dollar on renewed optimism of a trade deal between the US and China.
The only thing on the agenda today has been the release of German trade balance figures which have disappointed coming in at only a €18.1bn surplus, shy of the expected €19.1bn.
🇺🇸 USD – Last night’s minutes from the FOMC meeting in September showed that most policymakers believed the 25-bps rate cut was warranted and that there is a general concern about risks associated with trade tensions. There was minimal impact on the US dollar following the news.
On the trade war front, there seems to be optimism of an accord being reached with Bloomberg reporting that the US is planning to enter into a currency agreement with China – so developments on this could be key for future tariffs and relations between the two nations
Inflation data will be the economic focus today with markets expecting a pick in the rate from 1.7% (YoY) in August to 1.8% in September.
GBP: Growth forecasted to drop to 0%
EUR: German trade balance figures disappoint
USD: Inflation in Focus
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