IFX Market Report: Wednesday 21st August 2019

The pound reversed early losses against the US dollar and euro on Tuesday after German Chancellor Angela Merkel said the European Union would consider practical solutions surrounding the Northern Ireland border.

Chancellor of the Exchequer Sajid Javid said that as a step towards accelerating the government’s preparation to leave the EU on October 31st, the government will allocate an Economic Operator Registration and Identification (EORI) number to nearly 88,000 companies which are in Britain’s VAT register in the next two weeks. The finance ministry said the move which is also seen as the government’s last attempt to show its readiness for a “no-deal” Brexit “will help ease the flow of goods at border points and support businesses to trade and grow”.

GBPUSD opened at 1.2098 and fell to a low of 1.2072, following Merkel’s comment the pound rose to a high of 1.2175.

Similarly, GBPEUR fell to low of 1.0893 but the pound strengthened throughout the afternoon to hit a high of 1.0965 shortly after the London session finished.

US President Donald Trump said yesterday that China had been “ripping off” the US for 25 years or longer and it was about time it changed, whether its good for the US or not. "Long term it’s imperative that somebody does this” and “Somebody had to take China on.” He also said that his government is looking at various tax reductions on both wages and profits from asset sales to calm down fears of a looming recession.

Italy's Prime Minister Giuseppe Conte has resigned following a blistering attack on coalition partner Matteo Salvini. Mr Conte said Mr Salvini had been "irresponsible" in creating a new political crisis for Italy for "personal and party interests".

Mr Salvini, the leader of the nationalist League party, had tabled a no-confidence motion against Mr Conte. Salvini said he could no longer work with his coalition partners Five Star. The League and the anti-establishment Five Star Movement formed a coalition government just 14 months ago with Mr Conte as an independent as prime minister.

EURUSD dropped to a low of 1.1072 early in the day but recovered later on to hit a high of 1.1106.

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