GBP Weak confidence in the UK economic outlook persisted with further concerns over the labour market and the recovery profile. The trade outlook also generated concern as EU trade talk rhetoric has been notably downbeat, maintaining market concerns over the outcome. It looks likely there’ll be a further delay in reaching agreement which compounds logistical difficulties for UK exporters, or no deal at all. Risk conditions remain a key driver for Sterling, causing a sharp dip when risk appetite fell early on, retreating to just below 1.2650 against the Dollar and near 1.0940 on the Euro.

The Pound recovered later in the day and settled close to 1.2730 against the Dollar while the Euro retreated to 1.1010. Trading conditions have been subdued this morning but the Pound is up at 1.2750 on the Dollar.

USD 

Expectations that US yields would remain negative continued to drain underlying support in the Greenback, especially with the Federal Reserve committed to a very expansionary policy over the medium term. There was also further speculation that the central bank could engage in yield control with real yield currently at -0.88%. The weakest reading since 2012, which will continue to chip away at Dollar buyers.

The US on Wednesday also ordered China to close its consulate in Houston amid accusations of spying, marking an unprecedented deterioration in relations between the world's two biggest economies and on the docket today, US jobless claims are due for release which could see some movement in the currency. 

EUR 

Following Tuesday’s deal on the EU recovery fund, overall confidence in the Euro-zone and Euro remained stronger. Investors consider that the risk of a break-up had declined sharply there are also expectations of increased long-term capital inflows. These positive factors have also encouraged short-term funds into the single currency, although speculative positioning is already high which will limit the scope for further buying.

There was an element of caution given that the deal needs to secure parliamentary approval with reports that the EU legislature would look to amend the agreement. Nevertheless, overall Euro sentiment continued to strengthen, especially given a lack of US confidence and as of writing, the common currency trades around the 1.1585 mark against its US counterpart. 

Data to watch

11:00 - GBP - MPC Member Haskel Speaks\

12:30 - USD - Unemployment Claims

14:00 - USD - CB Leading Index