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They say the markets hate uncertainty

They say the markets hate uncertainty

GBP
The Pound suffered a “no-deal Brexit” selloff right from the starter’s gun yesterday. Between 8am and 11am, Sterling dropped 0.5% against the Dollar and 0.4% against the Euro. The lack of economic data means there is little to distract from the Brexit headlines, following Liam Fox’s comments that we are heading for a no-deal scenario.  According to sources, the government was set to hold a meeting in early September to plan how to deal with any failure to reach a Brexit agreement. It’s not just British commerce that doesn’t like being in the dark, the money markets will vote with their feet. Today’s US data releases will at least provide trading impetus and pause the current downward trajectory.

 

Tomorrow’s UK GDP release is the Pound’s only near term hope of bucking the current trend. Should the Dollar strengthen beyond 1.2800, the Pound will likely plummet further.

 

USD

 

After a lack of market moving data yesterday across the pond, investors are focussing on the US-China trade spat as one of the exclusive drivers of the Dollar. In addition to the trade front, geopolitics could added some volatility after the US imposed further sanctions against Russia yesterday.

 

Today we see US PPI and jobless claims data at 1:30 P.M. The focus will also remain on the Federal Open Market Committee (FOMC) member Evan’s speech scheduled at 2:30 P.M. ahead of the US CPI report due tomorrow.

 

EUR

 

Yesterday, the Euro held its ground to the dollar, trading at around 1.1615, and consensus is that due to the lack of data releases, it could stay at this level. Combine this with the lack of news on Italy, the bond markets should keep calm and therefore we should see a fairly stable Euro today.

 

Having said this, the impending 2019 budget plan from Italian politicians – and the inevitable scrap that will follow – makes the Euro increasingly vulnerable to losses. The fear is that Italy will clash with hawkish bureaucrats in Brussels over public spending, putting pressure on a country that is already garnering anti-Euro feelings.

 

Aside from the Economic Bulletin this morning, which gives an indication of the state of the Eurozone economically, there is virtually no data coming out today that would impact the Euro.

 

Data to watch:

 

09:00    EUR Economic Bulletin

 

13:15    CAD Housing Starts s.a (YoY) (Jul)

 

13:30    USD Producer Price Index ex Food & Energy (YoY) (Jul)

 

13:30    USD Initial Jobless Claims (Aug 3)

 

13:30    USD Continuing Jobless Claims (Jul 27)

 

13:30    CAD New Housing Price Index (YoY) (Jun)

 

13:30    CAD New Housing Price Index (MoM) (Jun)

 

 

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