IFX Market Report: Thursday 29th August 2019

The pound fell to a six-day low on Wednesday as the UK’s Queen Elizabeth approved Prime Minister Boris Johnson’s request to suspend parliament, leaving opposition lawmakers very little time to prevent a no-deal Brexit. The pound was trading 0.6% lower against the dollar and was down 0.4% against the euro.

The first weeks of September is when opposition MPs will have to come together in order to prevent a no deal and cause the pound to recover from its latest fall. Downside risk will continue to push the pound lower in the meantime with some analysts predicting a drop below its recent low of $1.2015

GBPUSD opened at 1.2269 and quickly fell to a low of 1.2193. The pair then recovered some of these losses across the rest of the day, closing at 1.2236

GBPEUR opened at 1.1059 and followed a similar pattern, hitting a low of 1.0994 and then closing at 1.1043

The dollar rose on Wednesday but stayed within a narrow range as the US yield curve inversion is causing concerns about a possible recession. This comes ahead of US and Chinese retaliatory tariffs coming into effect on September 1st. The dollar index rose 0.25% and the Japanese yen was down 0.32% but remained close to recent highs in light of the prevailing risk-averse nature of investors.

The euro was slightly weaker against the dollar, 0.12%, but was again helped a little by news in Italy that the 5-Star Movement and opposition Democratic Party would form a coalition, avoiding an election. The Chinese yuan remained close to the record low it reached on Monday.

EURUSD was little moved but opened at 1.1091 and fell slightly across the day, closing at 1.1080

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