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Sterling volatility as trade talks dominate

Sterling volatility as trade talks dominate

GBP

Political and trade considerations dominated proceedings yesterday and the pound declined sharply after EU Commission President Von der Leyen confirmed that the EU had launched legal action against the UK over the Withdrawal Agreement. 

Sterling later recovered lost ground following reports that the UK and EU had found a level playing field surrounding fisheries but EU officials dismissed the idea of a breakthrough. 

As a result of of the varying updates throughout the day, the pound was particularly volatile and with EU and UK Chief Negotiators continuing to meet more volatility is very likely.

Sterling starts today at 1.0960 against the Euro and just above 1.2860 against the Dollar. 

 

USD

Initial US jobless claims declined to 837,000 in the latest week from a revised 873,000 the previous week and just below consensus forecasts of 850,000. Continuing claims declined to 11.77mn from 12.75mn the previous week, although overall claims, including pandemic assistance, rose in the week to September 12th.

The ISM manufacturing index retreated to 55.4 for September from 56.0 the previous month and slightly below consensus forecasts of 56.2. There was a monthly slowdown in production and new orders growth, although the rate of expansion was still robust. There was only a slight decline in employment for the month while prices increased at a faster pace. The overall data was impacted was limited with both the Euro and dollar struggling for traction and the Euro against the Dollar settled around 1.1740.

The latest US employment report will be released today, although the overall impact is liable to be limited unless there is a huge miss and decline in payrolls.

 

EUR

The final Euro-zone PMI manufacturing index was unchanged from the flash reading at 53.7 from 51.7. Last month the Spanish index returned to expansion for the month.  The Euro-zone unemployment rate has increased to around 8.1% for August from 8.0% previously and in line with market expectations.

The Euro gained ground briefly following speculation that the UK and EU were poised to strike a trade deal, but gains faded quickly as these reports were shut down very promptly. From highs at 1.1770, the Euro retreated to below 1.1750 with Euro-zone coronavirus developments also unsettling confidence in the single currency.


Data To Watch

08:00 – EUR – Spanish Unemployment Change 

13:30 – USD – Average Hourly Earnings 

13:30 – USD – Non-Farm Employment Change 

13:30 – USD – Unemployment Rate 

15:00 – USD – Revised UoM Consumer Sentiment

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