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All that glitters…isn’t Sterling

All that glitters…isn’t Sterling

GBP
Halifax house prices rose 1.4% in July, beating consensus forecasts of a 0.2% gain. The annualised house prices printed 3.3%, up from 1.8% in July, suggesting domestic demand could be rising. The Pound was briefly bolstered by the data but was inevitably undermined by Brexit uncertainty.

 

The market was unsettled by reports that support for the government’s negotiating stance was eroding; further unsettling sentiment. It now appears likely that deadlines for a Brexit deal are likely to be pushed back to the end of November in the first instance. Sterling failed to push beyond 1.2970 against the Dollar and then drifted lower while the Euro pushed Sterling lower to 1.1160.

 

Ian McCafferty, an External Member of the Bank of England echoed previous statements that inflationary pressure was gradually increasing, but given his departure before the next monetary policy votes, the market was unmoved. Sterling failed to muster more than a limited recovery before the Euro pushed to 1.1150, levels last seen in October, in the early hours of this morning. The Pound hitting selling interest above 1.2950 against the Dollar, victim of wider global market moves, and opens at 1.2934. Friday’s UK GDP releases now command market focus.

 

USD

 

JOLTS job-opening for June printed the same figure as May; 6.66m, modestly below forecast and the number of hires dipped. The data still retains confidence in the labour market, but the Dollar was unable to gain failed to kick on after the Dollar Index failed to break to 2018 highs. The Euro briefly moved above the 1.1600 level before settling just below as Bond market movements largely cancelled themselves out.

 

Dollar demand was subdued at the European open, the Euro pushed to the 1.1625 area as markets turn their focus to Thursday’s US inflation reports.

 

EUR

 

Yesterday was a day of slight recovery and resistance to the selling pressure with the currency heading towards the 1.1600 mark against the USD. This was mainly due to the USD losing ground, but it was helped by Italian bonds having a slight rally. The relationship between Italy and the EU could be worth keeping an eye on, as it seems to be getting worse. Having said this, it is highly unlikely to have a detrimental effect on the EUR yet.

 

The GBP/EUR rate struggled to 8-month lows with the general consensus being this was caused by a weak Pound and a strong Euro. This is seen as more of a market correction and is not considered a problem for the currency pair.  

 

The only economic news today is the Spanish industrial output and the French individual investment – both very low volatility pieces of data. It is a similar story for the rest of the week regarding news. Focus is on Asia, the US, and, on Friday, the UK, with EUR data being scarce to say the least.

 

Data to watch:

04.00        CNY Imports (YoY) (Jul)

04.00        CNY Trade Balance CNY (Jul)

04.00        CNY Exports (YoY) CNY (Jul)

04.00        CNY Exports (YoY) (Jul)

04.00        CNY Imports (YoY) CNY (Jul)

04.00        CNY Trade Balance USD (Jul)

04:05        AUD RBA’s Governor Philip Lowe Speech

22:00        NZD RBNZ Rate Statement

22:00        NZD RBNZ Interest Rate Decision

22:00        NZD Monetary Policy Statement

22:00        NZD RBNZ Press Conference

 

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