IFX Market Report: Friday 10th January 2020

The pound fell to a two-week low against the dollar after the Bank of England Governor Mark Carney implied that central bank would be willing to quickly drop interest rates in case of persistent economic weakness. The pound fell 0.6% at one point, against both the dollar and euro. Some analysts are quoting a 60% chance of a 0.25% rate cut by the end of the year. His optimistic comments were largely overshadowed by the implication of a rate cut.

The UK continues to release poor economic data which most recently includes the reduction in retail spending in late 2019. Investors are also now focused on Brexit negotiations with Michel Barnier, the EU’s chief negotiator, saying that the UK’s access to EU markets will be proportional the UK’s willingness to maintain EU standards.

GBPUSD opened at 1.3094 and fell to a low of 1.3020 in the morning. The pair recovered somewhat in the afternoon to close at 1.3063

GBPEUR opened at 1.1786 and performed similarly, hitting a low of 1.1722 and closing at 1.1763

The safe haven currencies fell again against the dollar, with the Japanese yen hitting a two-week low as conflict between the US and Iran looked even less likely to escalate to war. This has increased investors risk appetite with the dollar index 0.1% higher. Markets are waiting for today’s US non-farm payroll report, but analysts believe there is not much scope for surprise upside.

The dollar gained 0.4% against the yen but the Swiss franc was little changed. The US and China are expected to sign a trade deal next week which will further boost risk appetite. Gold prices also fell back from seven-year highs it hit previously in the wake of the Iranian attacks on US military bases.

EURUSD opened at 1.1114 and dropped only slightly across the day, finishing at 1.1104

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