Sterling hammered on Brexit sentiment

GBP

Brexit trade considerations remains the focal point in market direction for Sterling as reports on comments made by an EU Diplomat that the UK Internal Market Bill could have huge negative consequences. EU President Von der Leyen also stated her concern around the UKs intention to breach the Withdrawal agreement alongside US House Speaker Pelosi additionally adding the UK Brexit could also imperil a UK-US trade pact. Sterling sentiment remains very much negative with the UK Currency falling to fresh 4-week lows just below 1.2900 against the Dollar and 1.0955 against the Euro. 

There were also comments from officials that the EU would not break-off trade talks which provided an element of relief, although uncertainty was still a key element. In this context, there were reports that the EU could consider legal action against the UK. The UK-EU Joint Committee will hold an extraordinary emergency meeting today. 

There was also an element of short-covering after several days of selling pressure. As equity markets made net gains with Sterling making a small recovery to trade around the 1.3010 against the Dollar and 1.10 against the Euro.

 

USD

The Dollar maintained a firm tone heading into the US open yesterday with the currency still gaining amid vulnerability in risk appetite. The Euro, however, found support just above the 1.1750 level and rallied into the Asian session as equities posted strong gains.

US developments remained limited with no significant data releases while the Fed remained silent ahead on next week’s policy meeting. The Dollar also lost wider support as commodity currencies pushed higher. Currently trading, the US currency finds itself just above the 1.1820 against the Euro.

 

EUR

Yields at the German 10-year bond auction declined slightly to -0.50% from -0.47% previously, limiting potential Euro support while global risk trends dominated market moves.

There were no significant Euro-zone data releases on Wednesday as ECB Council member Muller stated that a timely exit from emergency measures is important, although markets were focussed on the shorter-term outlook and Thursday’s policy meeting. 

There are also no expectations that the ECB will make policy changes at Thursday’s meeting and any changes to forwarding guidance will be watched closely alongside President Lagarde’s press conference an important aspect. A lack of concern however, could likely trigger short-term Euro buying. Choppy trading is to be expected during and after Lagarde’s press conference.

 

Data to watch

12:45 – EUR – Main Refinancing Rate 

12:45 – EUR – Monetary Policy Statement

13:30 – EUR – ECB Press Conference 

13:30 – USD – Core PPI 

13:30 – USD – PPI

13:30 – USD – Unemployment Claims 

16:00 – USD – Crude Oil Inventories 

18:00 – EUR – ECB President Lagarde Speaks