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Monetary Policy and Backstops

22nd August 2019 Market Update

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🇬🇧 GBP –  Brexit talks continue to be the focus with German Chancellor Angela Merkel yesterday suggesting a solution to the backstop might be achievable in the next 30 days, during Boris Johnson’s trip to Germany. However, later in the day the EU seemed to resume their previous stance of rejecting PM Johnson’s call for a removal of the backstop as French President Macron insisted that reopening negotiations was “not an option”.

Today, Boris Johnson will meet the French President over lunch, thus any further comments on the possibility of opening up negotiations will be watched for closely.

🇪🇺 EUR – Very quiet day on the data front yesterday from the EU. Focus though was on Brexit and any further discussions at Jackson Hole.

Today the July meeting minutes will be released along with monetary policy discussions from Jackson hole. The minutes will likely be dissected for any further insight regarding new policy measures. In addition, we have already had manufacturing and services data from France, Germany and the Eurozone as a whole with the lot all positive.

🇺🇸 USD –  Last night FOMC minutes showed a wide divergence in views on further interest rate cutting in the US, with some members calling for a 50bp cut whilst others argues to keep the rates unchanged. In addition, it was emphasised that the initial cut should be seen as a mi-cycle adjustment and not the start of an aggressive easing cycle and that the Fed wanted to remain flexible to their approach rather than being on a pre-set course.

Today, we have manufacturing and services data due out today if the manufacturing slips into contraction we may see some pressure on the strong dollar. At Jackson hole, we will hear more on “Challenges for Monetary Policy” as the current theme today.

 

Summary:

GBP: PM Boris Johnson to meet French President today, Brexit talks continue
EUR: ECB meeting minutes in focus today
USD: Fed minutes show divided committee and no pre-set course to be taken on interest rate


 

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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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