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Yellowhammer puts Pound on pause

Yellowhammer puts Pound on pause

GBP

A Scottish High Court ruling that prorogation of parliament was unlawful will go to the Supreme Court on Tuesday as the government will appeal. There was no immediate move to reconvene the parliamentary session and the government released official advice on ‘no-deal’ Brexit implications. German Chancellor Angela Merkel stated her optimism for an orderly Brexit but the Pound failed to capitalise despite improved global risk appetite. The Dollar put up strong resistance near 1.2370 before a tumble to near 1.2320 while the Euro settled around 1.1190 after the Pound hit resistance near 1.1235. 

The RICS housing survey recovered to -4% for August from -9% previously, although political uncertainty is still a major negative factor for the housing sector. The Pound is slightly lower this morning ahead of the key ECB meeting. 

USD

US producer prices increased 0.1% for August with the annual increase marginally above consensus forecasts at 1.8% from 1.7% previously while core prices rose 2.3% over the year compared with market expectations of 2.2%. 

President Trump stated that the Federal Reserve (Fed) should cut interest rates to zero or below, although there was no significant market impact. Ahead of next week’s policy meeting, futures markets priced in an 89% chance that the central bank would cut interest rates by a further 0.25% with no comments from Fed officials and CPI data due today.

 

EUR

The German IFW and DIW economic institutes cut their GDP growth estimates with the IFW forecast for 2020 growth cut to 1.0% from 1.6% while 2019 growth was expected to be held to 0.4% as market confidence in the outlook remains weak. There was a fresh decline in German yields yesterday which sapped Euro support, dipping the currency below 1.1000 against the Dollar. 

The Euro has stabilised this morning and is back above the 1.1000 major figure at 1.1015 ahead of the ECB’s policy decision. There are strong expectations of a cut in interest rates with the decision on bond purchases, forward guidance and Draghi’s commentary likely to be crucial for the Euro. Volatility is to be expected following the meeting.

 

Data to watch

12.45 EUR – Monetary Policy statement

13.30 EUR – ECB Press Conference

13.30 USD – CPI

13.30 USD – Core CPI

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