UK financial sector ready for no deal Brexit

12th July 2019 Market Update

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🇬🇧 GBP –  It was a case of what goes up, must come down for the Pound yesterday as a boost for Sterling through the morning lasted only until about 14:00. The afternoon saw a complete reversal of the gains from earlier in the day as markets reacted in the absence of data. Carney spoke in the morning confirming that the Bank of England believes that the UK financial sector can withstand a no deal Brexit and a trade war, even if they occurred simultaneously.

Today only features a speech from the Bank of England MPC member Vlieghe but the content is yet unknown. This may leave traders to dwell on the uncertainties for the Pound which many are predicting will have a difficult summer. With the Brexit deadline arriving quickly, diplomatic relations with the US and China worsening and any hope of an interest rate rise having been abandoned, it is hard to see a reason for investors to prop up the Pound in the short to medium term.

🇪🇺 EUR – French and German CPI both came out yesterday in line with market expectations at 0.2% and 0.3% respectively. As this was in line with market expectations, the exchange rates hardly moved in response. The euro moved across the day following data from the US. Going in to this morning, stocks are expected to slide in Europe as German exporter Daimler announced a profit warning due to concerns about global trade. This morning industrial production figures are expected to rise slightly, to 0.2%.

🇺🇸 USD –  Weekly jobs figures from across the pond surprised to the upside along with core inflation, which saw its 16th consecutive month of sitting at or above 2% yesterday. However, this is unlikely to change the Fed’s recent narrative of an impeding rate cut, with Fed Chair Jerome Powell saying “inflation pressures remain muted” yesterday, as he referred to softer core PCE inflation which the Fed also uses to track inflation in the US.

Today, we have little on the agenda bar Producer prices, but this news is unlikely to make any impact on the dollar. Though, any further hints on the next rate decision by Fed member Charles Evans in his speech this afternoon will be looked at closely.

 

Summary:

GBP: Carney stresses the resilience of the UK financial sector in case of no deal Brexit
EUR: European concerns as Daimler announces a profit warning
USD: Powell stresses inflationary pressures remain muted


 

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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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