23rd October 2019 Market Update
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🇬🇧 GBP – The Pound backed away from recent highs throughout the trading session yesterday as Brexit uncertainty stymied the recent optimism. However, Sterling maintained very good levels as the consequences of the Withdrawal Bill vote became clearer. Around mid-afternoon, Johnson confirmed that he would pull the vote on the deal if Parliament rejected the Withdrawal Bill and seek a General Election instead. The threat of an election has previously been negative for the Pound.
In the evening, Parliament voted in favour of Johnson’s deal leading to a small rise for the Pound but the extremely tight timeframe for debate proposed by the Government was rejected. This was a big set back for Johnson and now means that it is virtually impossible for the UK to leave the EU with a deal on 31st October. Johnson confirmed he will pause the Withdrawal Bill which led to the Pound falling by around 1% against the US Dollar, although a fall of greater magnitude may have occurred if Johnson had called for an election immediately. Instead, he will wait for the EU response before proceeding with the plan to go to the polls. Tusk has recommended a delay to the EU27 with January 31st appearing as the most likely new deadline day.
There is no data for the markets to consider today which means that Sterling movements will be wholly dependent on Brexit developments.
🇪🇺 EUR – The Eurozone was devoid of data yesterday. In a change to a few months ago, the Euro now tends to move in the same direction as the Pound in relation to Brexit headlines in recognition that a no deal would be damaging to the single bloc as well. Consequently, the Euro lost ground against the US Dollar yesterday as the ratification of the deal become less certain.
Consumer confidence figures will be published at 3pm for the Eurozone which are expected to fall further into negative territory. However, the latest Brexit headlines will dominate movements as we have already seen with the Euro continuing to slip following last night’s events in Parliament.
🇺🇸 USD – The ongoing saga of the US – China trade war continues to have an impact on the US Dollar. A comment from China’s Vice Foreign Minister that progress was being made with respect between the countries helped the Greenback to gain against its major peers. This was in combination with taking advantage of Sterling and Euro weakness as well as the Fed interest rate decision appearing on the horizon next Wednesday. The US Dollar also gained against the Canadian Dollar which weakened following Trudeau being reduced to a minority Government in their election.
The economic calendar is empty for the US today and so it is likely that we will see a continuation of the trends seen yesterday in impacting the Greenback.
GBP: Pound edges lower as EU departure date uncertainty increases
EUR: Mirroring Sterling’s move lower against US Dollar
USD: Trade war continues to affect Dollar
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