IFX Market Report: Monday 2nd September 2019

The pound made strong gains against the euro on Friday as the single currency suffered against its major rivals, making the pound more appealing to investors. However, this rise was limited by the fact that markets are braced for a volatile week for sterling as British parliament re-opens. There are plans from opposition parties to try to prevent a no-deal exit from the EU, but analysts still believe the likelihood of a no deal is higher than it ever has been.

The pound gained 0.4% against the euro and rose 0.8% across August. Against the US dollar it was largely unchanged. A median forecast for a disorderly exit from the EU puts the probability at 35%, up 5% from July. However, in early trading this morning that pound has slid against the dollar, now below the $1.21 mark.

GBPUSD opened at 1.2176 and rose steadily across the day, reaching a high of 1.2218 in the early afternoon, before erasing these gains to close at 1.2164

GBPEUR opened at 1.1032 and rose steadily in the morning, before jumping in the late afternoon to close at 1.1069

The euro fell more than 0.5% against both the Japanese yen and Australian dollar on Friday. The longer-term trend for the fall in the euro has been claimed on the economic slowdown affecting the region, but Friday’s drop was attributed to numerous factors including a month-end rebalancing of portfolios which heightened an existing bias. Poor eurozone data on Thursday reinforced the view that the European Central Bank would cut interest rates this month.

The dollar index was 0.38% higher on Friday, having been moved mostly by news on trade discussions. Investors remain worried that prolonged discord between the US and China would lead the US economy into recession.

EURUSD opened at 1.1037 and was steady until the early afternoon, at which point it dropped sharply to a low of 1.0968 shortly after closing

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