IFX Market Report: Tuesday 27th August 2019

The pound fell on Friday after enjoying its biggest one-day rise in months the day before. Investors were hopeful that a deal could be reached with the EU after comments made by German Chancellor Angela Merkel suggesting that a solution could be found to the question of the Irish border which has been the main barrier to passing a deal through Parliament.

The pound fell as much as 0.5% against the dollar and 0.1% against the euro before recovering in the latter half of the day. This morning however it has continued to creep back up against the dollar as investors monitored the ongoing Brexit talks.

The pound is extremely sensitive to political news at the moment and last week these movements were exaggerated by thinner liquidity. Most banks have raised their forecast for the likelihood of a no-deal Brexit, increasing downward pressure on the pound, though they still believe the UK will avoid this situation in the end.

GBPUSD opened at 1.2203, having fallen in early morning trading, but rose steadily across the day to close at 1.2265, close to the high it reached the day before.

GBPEUR opened at 1.1025 and reached a high of 1.1060 before dropping sharply to close at 1.1010

The dollar was stronger on Monday, recovering from losses over the weekend, as the US and China looked to ease trade tensions. President Trump said Chinese officials had contacted US trade officials to say they wished to return to the negotiating table. The dollar index recovered 0.33%. Last week was volatile for the greenback, with unpredictable comments from President Trump as well as events to give investors optimism.

On Friday the euro rose 0.6% against the dollar after hitting a three-week low the day before. The Chinese yuan fell to its lowest since February 2008 while the Japanese yen suffered from the temporary calm in the markets, falling 0.57% against the dollar.

EURUSD opened at 1.1068 and was steady in the morning before rising sharply in the afternoon to close at 1.1139

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