IFX Market Report: Monday 1st July 2019

The pound recovered on Friday after reaching five-month lows against the dollar and the euro. Concerns of a potential no deal Brexit meant gains were modest. Sterling was up 0.4% against the dollar, leaving it 3% up for the month. Similarly, it gained 0.24% against the euro and but the pound is still 4% down for the year against the single currency.

Investors are likely to hold off any major bets on the pound until the conclusion of the Conservative Party leadership contest which will conclude on 22nd July. Among analysts there is some discussion as to whether the pound is currently under-valued and has the potential to make strong gains if there is positive news. Likewise, there are those who also believe that the risks of a no deal Brexit have not been fully priced in which could lead to steep losses as the October deadline looms.

GBPUSD opened at 1.2675 and made steady gains across the day, reaching a late afternoon high of 1.2718 before dropping down to close at 1.2698

GBPEUR opened at 1.1131 and made gains across the day, reaching a high of 1.1176 shortly after closing

The dollar fell slightly on Friday as US economic data confirmed the markets belief that interest rates would be cut in July, but investors were waiting to hear news from the G20 summit meetings between the US, China and Japan. The US personal consumption expenditure index rose 0.2% which boosted expectation that the Federal Reserve will rates by 0.25% down to 2.25% in July. The dollar index that measures the greenback against six major currencies was largely unchanged on the week.

Investors believed that, despite dollar weakness, the euro was still likely to fall against the dollar this week as any dollar losses would not be sustained. Conversely, The G20 summit meeting saw the Xi Jinping and Donald Trump agree to restart trade talks which is positive news as investors also feared this could have become an escalation in the trade conflict. The dollar has been making gains in this mornings trading as a result.

EURUSD opened at 1.1382 and had a neutral day, with any gains made being erased shortly after. The pair closed slightly lower at 1.1368

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