IFX Market Report: Monday 10th June 2019

Sterling reached a two-week high against the dollar on Friday after weak US jobs data hurt the greenback and strengthened the argument for an interest rate cut in the US.

The results of a Peterborough by-election came in on Friday morning and confirmed the incumbent Labour Party managed to hold on their seat, narrowly beating the newly formed Brexit Party by 683 seats, the Conservatives were pushed into third place. Nigel Farage, who founded the Brexit Party less than two months ago, said the result was "very significant".

Markets remained unsettled as the result highlights the growing popularity of the pro-leave Brexit party and it looks increasingly likely whoever takes over as Prime Minister from Theresa May is going to negotiate hard with Europe, leaving a no-deal hard Brexit firmly on the table.

Though there has been very little betting on the pound, Sterling has gained 0.4% against the dollar on Friday and was up 0.8% for the week. Against the euro, the pound lost 0.1%, keeping it near a 6-month low.

GBPUSD opened at 1.2715 and rose in the morning before jumping on the back of the US jobs data, reaching a high of 1.2759 before closing at 1.2747

GBPEUR opened near a high at 1.1288 and gained slightly in the morning before falling for most of the afternoon, closing at 1.1239 and reaching a low of 1.1227 late in the evening

The dollar fell to its lowest since March after the US Department of Labor’s report showed that job growth slowed a lot in May and wages rose less than expected. The slowing jobs growth is partially attributed to rising trade tensions and is predicted to continue in this current climate. There has been no sign of any imminent solution to the disputes with Mexico and China, two of the US’ biggest trading partners.

The recent weak data has suggested that US economy has lost momentum and the rising expectations of rate-cut have caused to the dollar to fall about 1.2% this week. Chances of a rate-cut in June are at 22.5% and for July, at 69.1%. The markets are pricing in 2-3 rate-cuts this year. Elsewhere the dollar fell 0.23% against the Japanese yen and was down 0.52% against the euro while the Canadian dollar gained 0.67% against its US rival.

EURUSD opened at 1.1264 and was steady for the morning until the US jobs report caused it to jump to a high of 1.1342 which is where it closed later on.

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