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Uncertainty causes Sterling to slip.

Uncertainty causes Sterling to slip.

GBP

UK mortgage approvals fell slightly and CBI retail sales recovered to -16 for September, up from -49 previously. The CBI also reported positive figures for the car sector despite being the fifth successive figure in negative territory and retailers forecast another decline for October. 

The House of Commons resumed business yesterday and confrontational rhetoric increased the fears that no compromise would be reached on a Brexit deal. Sterling slipped as the uncertainty undermined confidence especially on fears over a lack of inbound investment. European Parliament Brexit coordinator Guy Verhofstadt stated that the UK had only presented parts of alternative solution to the Irish backstop. The Pound dropped steadily, falling below 1.1300 on the Euro, but more markedly to lows below 1.2350 against the Dollar as traders banked profits.

Today Jacob Rees-Mogg promises an “exciting announcement”. BoE Governor Mark Carney is speaking at the European Systemic Risk Board annual conference, which may give clues on how Brexit will affect the BOE’s future moves.

USD

US equities pushed higher after Trump said yesterday a trade deal with China “could happen sooner than you think”. President Trump also signed a partial trade deal with the Japanese Prime Minister Abe, easing commercial tensions between the two countries. The deal includes agricultural concessions from Tokyo in exchange for a reduction in some US industrial tariffs.

US Chicago Federal Reserve (Fed) President Evans stated that policy needed to be on guard given the risks associated with trade, but he was not trying to overcome risks that haven’t yet materialised. Overall, he was open to the possibility of a further rate cut this year, although the overall rhetoric was not overtly dovish while Dallas head Kaplan stated that current policy is on the margin of being accommodative.

A stronger than expected reading for new home sales of 713,000 also boosted confidence.

 

 

EUR

The Euro is operating on slippery grounds, having printed its lowest close in over two years yesterday at 1.0942. The possibility of it dropping further could be on the cards as ECB’s President Draghi will be speaking later today in Frankfurt. Draghi’s speech, this time at the European Systemic Risk Board annual conference will be closely scrutinised for further directional rhetoric. If he negatively characterizes the Eurozone inflation, economic conditions and reiterates the need for bond purchases, market movers may decide to take action and force the common currency down to the low 1.09s or further. 

The central bank cut its interest rate at their previous meeting in September by 10 basis points to 0.50% and announced a QE program, which will begin early November. As of writing, the Euro is on the defensive at 1.0945. 

 

 

Data to watch

13.30 USD – Final GDP

14.30 EUR – ECB President Draghi Speaks

14.45 GBP – BOE Gov Carney Speaks

15.00 USD – FOMC Member Bullard Speaks

16.46 USD – FOMC Member Clarida SpeaksUn

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