Labour conference in focus

23th September 2019 Market Update

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🇬🇧 GBP –  Sterling benefited last week reaching 4 month highs against the Euro and 3 month highs against the dollar. This was triggered by European Commission President Jean-Claude Junker who said “we can have a deal” and “Brexit will happen”. Analysts now believe that the likelihood of the UK leaving the EU without a deal has fallen below 20%. The key falling point for Boris has been the Irish Backstop, however the key breakthrough was Junker stating that if the objectives are met – all of them – we don’t need the backstop.

Labour dealt a low blow this weekend as they ‘fluffed’ their chance to showcase their radical policies ahead of a general election, diminishing their chance of proving stability within their party. The Supreme Court will come to a decision either later this evening or tomorrow morning on whether Johnson’s suspension of parliament was ‘unlawful’. Boris arrived in New York yesterday ahead of his talks at the UN General Assembly which begins today, he believes that he’s “cautiously optimistic” that he can strike a Brexit deal. Despite Junker’s positive comments, Boris’s meeting’s with Merkel, Macron and Donald Tusk are still ‘far apart’ in the eyes of the European Council President. The only data of note from the UK is BOE’s Governor Carney who speaks on Thursday.

🇪🇺 EUR – The Euro was the biggest loser last week falling over 2 cents across the board. The EU was offered no sentiment in terms of news or data last week, however started today 0.7% lower against the dollar after German Flash Purchasing index raised more fears about the health of the economy. The survey showed that the German private sector activity shrank for the first time in 6 1/2 years in September as a manufacturing recession deepened unexpectedly and growth in the service sector lost momentum. There is no other red flag data released from the European Union this week.

🇺🇸 USD –  The US cut interest rates to 1.75 – 2% last week as expected. Regardless of this Trump still believed that Jay Powell and the FED failed the US again. The dollar continued to rise against a basket of currencies on Friday prompted by potential progress in the U.S-China trade talks and that the Fed would not lower rates aggressively. Busy week in terms of US data as today offers Flash Manufacturing PMI and FOMC speeches from Williams and Bullard. Tuesday releases CB Consumer Confidence but Thursday will be key as Final GDP (QoQ) is released.

 

Summary:

GBP: Sterling still buoyed on Brexit hopes
EUR: Euro sentiment still weak
USD: Markets still digesting rate cut


 

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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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