IFX Market Report: Tuesday 10th September 2019

The pound enjoyed another day of gains as raft of UK economic output data released in the morning beat expectations and investors became more certain the UK would not be leaving the European Union on the 31st October without a deal in place.

Prime Minister Boris Johnson’s calls for an October general election to break the Brexit deadlock were blocked again in Parliament yesterday and a November election is now looking more likely. Following the vote, Johnson reiterated previous comments that he would not ask the EU for an extension despite a law coming into force just hours before which demands he delays Brexit again until 2020 unless a deal in reached. Though the delay will likely go ahead, the result of the election will now play a stronger role in moving the pound.

Speaker of the House, John Bercow has said he will resign by October 31st. He has been supportive of allowing MPs to take control of legal matters in parliament, making no-deal less likely. Sterling will remain volatile but the chances of the ultimate outcome of a hard Brexit has remained around 35% according to some analysts
Industrial Production, Manufacturing Production, Construction Output and Index of Services data releases all came out better than expected, suggesting the UK is not heading into recession as many analysts had predicted. The UK’s dominant services sector helped drive up activity by 0.3% across the board pointing to modest growth in the current quarter.

Sterling will remain volatile but the chances of the ultimate outcome of a hard Brexit has remained around 35% according to some analysts.

GBPUSD opened at 1.2269 and quickly rose to a high of 1.2372 and then slowly dropped back down across the afternoon to close at 1.2349

GBPEUR opened at 1.1121 and followed a similar pattern, reaching a high of 1.1222 before dropping back down to 1.1165

The euro made gains yesterday after a report that Germany may boost fiscal stimulus spurred hopes that other governments in the Eurozone will do the same. The euro gained 0.22% against the dollar but gains were limited due to the upcoming European Central Bank meeting on Thursday in which investors are expecting a new package of monetary stimulus.

Analysts looking at the US dollar are anticipating consumer price inflation data on Thursday and retail sales data on Friday. Last Friday’s job’s report showed US job growth had slowed more than expected in August. The Federal Reserve will meet on the 18th of September and Chairman Jerome Powell has said the Fed will continue to act “as appropriate”, boosting expectations of a rate cut.

EURUSD opened at 1.1032 and rose steadily across the day, reaching a high of 1.1065 shortly before closing.

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