IFX Market Report: Thursday 19th December 2019

The pound continued its two day fall on Wednesday as markets continued to react to the potential outcome of the UK leaving the EU without a deal at the end of 2020. Prime Minister Boris Johnson has ruled out any further extensions beyond 2020, creating a hard cliff edge. The pound fell 0.5% against the dollar and has erased almost all of its post-election gains.

The pound also fell 0.2% against the euro as some analysts placed the chances of a no-deal Brexit at 25%. Johnson has previously missed his own “do or die” deadline of October 31st so there is still a chance this deadline could be extended.

Meanwhile Bank of England Governor Mark Carney warned on Tuesday that monetary policy tools may become ineffective without global governments cooperating more on trade policy. Some analysts are predicting a 60% chance of an interest rate cut next year.

GBPUSD opened at 1.3098 and fell to a low of 1.3064 and recovered slightly to close at 1.3072

GBPEUR opened at 1.1765 and was steady across the day, closing almost unchanged at 1.1763

The dollar index was up 0.18% on Wednesday in what was a quiet day for dollar trading. There were no key data releases and expectations remain that the Federal Reserve will maintain rates for the majority of 2020. President Donald Trump was impeached by the House of Representatives last night in a vote by the Democrat controlled lower house. However, Trump is unlikely to be removed from office by the Republican controlled Senate, so markets are largely unreactive.

Both the Australian and New Zealand dollars performed strongly after good economic data and the euro remained steady, balancing out the threat of US tariffs with strong German business morale.

EURUSD opened at 1.1133 and fell to an afternoon low of 1.1114. Despite a brief jump to 1.1129 the pair retuned to close at 1.1113

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