IFX Market Report: Friday 19th July 2019

The pound rebounded on Thursday after retail data came in better than expected and lawmakers voted to make it more difficult for the next Prime Minister to force a no-deal by shutting down Parliament. As well as making a no-deal less likely, analysts have also pointed to media reports that EU chief negotiator Michel Barnier was open to alternative plans for the Northern Irish backstop arrangement.

Economists had largely predicted that UK GDP shrank in the second quarter of this year but retail sales data for June has given some hope that the economy has in fact kept growing. The pound was up 0.4% against the dollar and euro. Investors are still expecting turbulent times ahead for the pound.

GBPUSD opened at 1.2464 and rose slightly across the day, closing at 1.2486 but in the early evening rose sharply to a high of 1.2551

GBPEUR opened at 1.1090 and reached a late morning high of 1.1133 and remained close to that level for the rest of the day, closing at 1.1120

The dollar fell on Thursday as once again The Federal Reserve reinforced expectations among investors that there will be a rate-cut in July. New York Fed President John Williams said that the policymakers cannot afford to wait for economic problems to materialise before taking action with monetary policy. These dovish comments among other factors meant the index that tracks the dollar was down 0.52%.

The euro was up 0.44% against the dollar after European Central Bank staff are considering a potential change to the bank’s inflation target to around 2%. Elsewhere, the Australian and New Zealand dollars gained against their US rival 0.88% and 0.70% respectively.

EURUSD opened at 1.1240 and fell sharply in the morning after the ECB staff comments. The pair then recovered slightly across the rest of the day to close at 1.1226 before rising sharply in the early evening to a high of 1.1279

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