4th November 2019 Market Update
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🇬🇧 GBP – A different narrative was supposed to be written today for how Sterling was coping with its first few days out of the European Union. As it is, the Pound held its gains last week as the prospect of a Christmas election became reality. Previously, Sterling movements had been negatively affected by election threats, but the market now seems content that a no deal Brexit is less likely. On Friday, markets were unmoved by Manufacturing Sector PMI results improving to the best level since April, most likely due to stockpiling before the Brexit deadline. Farage’s threat that the Brexit Party would contest every seat unless Johnson abandons his current deal had minimal effect on the Pound as well, potentially splitting the Leave vote.
The General Election will increasingly be in the market focus for the coming weeks as polls are released to try and predict the outcome. On the data side, Construction and Services sector PMI results will be released today and tomorrow which are both expected to improve but may also be overlooked. The Bank of England interest rate decision on Thursday will capture market attention.
🇪🇺 EUR – Former IMF Chief Christine Lagarde took charge of the ECB on Friday and will have a tough job in succeeding Mario Draghi who many credit with saving the Euro. The Eurozone had a quiet end to the week with a lack of data but did manage to claw back ground against the US Dollar.
Today sees Manufacturing sector PMI results released for October which are expected to remain the same at 45.7. Markets will largely overlook this reading unless significant deviation for this figure transpires. Lagarde will speak this evening in her first speech as ECB President. Markets will be watching closely for clues on how she will approach a lacklustre Eurozone economy.
🇺🇸 USD – The US Dollar fell at the end of last week following data showing a mixed picture for the US economy. Markets had been braced for poor labour figures but the data proved to be better than expected which led to the Greenback rising initially. The gain was shortlived however, as manufacturing activity results fell short of expectations and concerns persist about the health of the US economy. Markets have not been convinced by Powell’s statement that the Fed has no further plans for an interest rate cut.
The US-China trade war will continue to influence safe haven currencies this week which could mean the US Dollar continues its run of losses since the Fed rate cut last Wednesday. Further measures of economic health are published this week in the form of Services sector and Non-Manufacturing results which could present further problems for the Greenback.
GBP: Focus on interest rate decision and comments this week
EUR: Lagarde makes her first speech as ECB President
USD: Dollar struggling over the last few days
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