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Sterling shedding gains rapidly

27th September 2019 Market Update

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🇬🇧 GBP –  Sterling came down to Earth with a bump yesterday as it hit two week lows after reaching multi-month highs just two days before. The market seems to be increasingly nervy with the lack of clarity on the next steps to resolve the Brexit deadlock. A General Election now seems inevitable which has been negative for the Pound at every stage.

The Pound has lost further ground in a sharp move this morning to hit fresh lows for the week. Brexit will continue to be at the forefront of the decision making for investors today as there is little data for them to digest. Headlines from Corbyn’s meetings with other opposition party leaders may yield some volatility. A speech from the Bank of England’s Michael Saunders is not expected to provide any forward guidance that would affect Sterling but the Pound looks likely to be under pressure ahead of the weekend.

🇪🇺 EUR – The single currency eased away from 28 month lows against the US Dollar on Thursday but this seemed to be more related to external events than strength from the Euro. Draghi’s speech on Macroprudential Policy was mostly historic in content and did not provide any movement for the Euro. Sabine Lautenschlager’s shock resignation from the ECB did not affect the Euro but with analysts suggesting she was unhappy with the ECB’s increasingly loose monetary policy, it does point to deep divisions within the committee that will post problems down the line.

Today will see some mid tier data releases for the Eurozone. Industrial, Consumer and Business Confidence figures will all be published at 10:00 and are expected to fall further into negative territory. This could quell the fightback from the Euro as it could add to the growing chorus that the Eurozone economy is headed for difficult times.

🇺🇸 USD –  The US Dollar dropped yesterday giving up some of its gains from earlier in the week. This is most likely to be a technical adjustment in reaction to the speed of the recent gains as data for the US in the form of inflation figures were positive which should have provided support.

The US has a significant amount of mid tier data released in the early afternoon but it would be a surprise if it created too much movement. The Greenback seems impervious to political risk in the US as attempts by the Democrats to impeach Trump gathers pace and as a result, the US Dollar looks set to continue to benefit as a result of its status as a safe haven currency.

 

Summary:

GBP: Fallen sharply on Brexit uncertainty following highs earlier this week
EUR: Euro could suffer from data releases today
USD: Remains strong despite political turmoil


 

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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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