25th November 2019 Market Update
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🇬🇧 GBP – The Pound lost ground last week after a rapid sell off on Friday caused its biggest daily drop in nearly 3 weeks. The initial PMI results for Services and Manufacturing sectors showed the biggest downturn since mid 2016 and was significantly worse than expected. This will bolster the argument of the 2 Monetary Policy Committee members from the Bank of England who called for an interest rate drop earlier in the month and this affected the Pound.
This week is devoid of economic data and so the General Election will remain the key influence for Sterling. The Conservatives released their manifesto in Telford yesterday focusing on their promise to deliver Brexit. The Pound jumped up on the market open yesterday evening as the Conservatives look increasingly likely to return to Westminster with a majority. More TV debates are scheduled for the coming days which have so far been largely uneventful but typically present more of a threat for the incumbent. Any erosion of the Tories’ lead is likely to be detrimental to the Pound.
🇪🇺 EUR – The Euro suffered on Friday as the single bloc joined the UK in publishing poor Manufacturing and Services sector results for November’s first reading. Manufacturing activity was better than expected but remained in contraction whilst Services disappointed markets but remained above the breakeven threshold. Christine Lagarde made her first major speech as President of the ECB on Friday morning but did not refer specifically to policy intentions as many analysts had hoped. The Euro slipped against the US Dollar throughout the day.
The economic calendar is empty for the Euro until Thursday when Consumer Confidence figures are published. Markets will be keeping a closer eye on Inflation Readings for November on Friday which are due to improve compared to the previous level. Unemployment figures are due to remain flat at 7.5% and therefore, it’s unlikely that the Euro will create any movement of its own this week.
🇺🇸 USD – The US Dollar was the key winner on Friday against the Euro and Sterling. The Greenback pushed back by 1 cent over the course of the day after being on track to trade within its smallest weekly range since July 2014 versus the Pound. Despite this, the US Dollar was largely flat against a basket of currencies as the trade war with China dominated news elsewhere. Hopes that a ‘Phase One’ deal could be reached were raised by comments from the Chinese President and this eased the demand for safe haven currencies such as the US Dollar. It is surprising, however, that markets continue to respond to such comments without any action to follow.
The US dominates the economic calendar this week and it will begin with speeches from Fed Chair Powell on Tuesday morning and then followed by Brainard in the evening. Personal Consumption figures are expected to improve on Wednesday which should help the Dollar to ease upwards. However, it is likely that political events will still be the key driver for any volatility.
GBP: Economic data has a surprise impact on Friday
EUR: Lack of data for the Eurozone
USD: Trade war talks with China edge forwards
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