Pound responds to Merkel’s optimism

23rd August 2019 Market Update

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?? GBP -  The Pound jumped to its best rate since the start of August in mid afternoon trading after tightly ranged sideways trading earlier in the day. Markets again jumped on comments made by Angela Merkel that the Irish border problem could be solved before October 31 which resulted in the Pound gaining nearly 1% against the Euro and US Dollar. Given the recent rhetoric from Boris Johnson on the willingness to seek a no deal Brexit, any optimistic headlines to the contrary are resulting in an immediate adjustment for Sterling.

Today features no data of relevance for the Pound and so it will continue to be sensitive to Brexit headlines.

?? EUR - Eurozone Manufacturing and Service sector PMI results were released early yesterday morning and showed an improving figure. Although manufacturing remains in negative territory, it moved closer to the neutral point and services picked up above expectations. However, the Euro was unmoved in its response, most likely because higher ranking data has been poor for the single currency of late.

The Eurozone is also devoid of data releases heading into the weekend. Therefore, it is unlikely that the Euro will experience much volatility.

?? USD -  The US Dollar weakened slightly yesterday as Manufacturing sector PMI results fells into negative territory. This will increase calls for the Fed to undertake further stimulus to keep the economy moving. Services sector PMI results were also lower and below expectations.

Markets have been moving all week in anticipation of today’s speech at the Jackson Hole symposium by Fed Chair Jerome Powell. Expectations are that he will address the Fed minutes released on Wednesday evening and be generally dovish in tone regarding the prospect of the US economy and growth worldwide. If Powell confirms that the Fed will shift to a rate cutting cycle, it is likely that the US Dollar will experience losses.



GBP: Sharp spike for Sterling on suggestions of a deal being possible
EUR: Improved data but remains under pressure
USD: Powell’s Jackson Hole speech in the limelight


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