Brexit Remains Key GBP Driver as Summit Nears

GBP continues to be driven by the latest Brexit headline's ahead of next week's EU Summit. Friday saw jobs data from Canada & the US.

Previous Day's Market Highlights

Sterling saw some support again at the end of last week as the Brexit news flow turned more positive, with reports that the EU could offer the UK a “super-charged” free-trade deal and that a divorce deal could be closer to completion than many have feared. Until a deal has been announced, the pound will remain vulnerable to the latest Brexit headlines, but ultimate confirmation of a deal could see sterling rally. The more positive sentiment helped sterling-dollar end the week up over 1.30 after earlier dropping below the psychological level.
 
As for the main data on Friday, US Nonfarm Payrolls disappointed at 134K versus the expected 185K, particularly after Wednesday’s strong ADP Employment Change set market expectations even higher. This prompted an initial move lower in the dollar, which was reversed on the more positive aspects of the report: July and August NonFarm Payroll readings were revised higher and the Unemployment Rate fell more than expected to 3.7%, the lowest since 1969. Wage growth was in line with expectations.
 
Canadian labour market data was largely positive. The Unemployment Rate fell from 6.0% to 5.9% as forecast, while Net Change in Employment was higher than projected at 63.3K versus the previous month’s 51.6K decline. The stronger figures support the argument for higher interest rates in Canada. The Canadian dollar briefly strengthened on the data before continuing to weaken against the pound.
 
The yuan weakened over the weekend after the PBoC cut the reserve ratio requirements to encourage lending. This marks the Chinese central bank’s fourth cut to the required reserve ratio this year

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1380 1.1391 1.1112 2.45%
GBP/USD 1.3084 1.3298 1.2897 3.02%
EUR/USD 1.1497 1.1815 1.1463 2.98%
GBP/AUD 1.8552 1.8624 1.7937 3.69%
GBP/NZD 2.0319 2.0423 1.9554 4.26%
GBP/CAD 1.6997 1.7190 1.6598 3.44%

Today's Market Highlights

Sterling-euro tested its highest levels since late June earlier this morning before the pound came under some pressure on renewed Brexit focus ahead of next week’s EU Summit. Despite some positive shifts, Brexit headlines remain a downside risk to the pound.
 
Today is a holiday in both Canada and the US. The lack of major data will leave market attention on the latest Brexit and trade headlines and may otherwise keep exchange rates relatively contained within familiar ranges. The Italian budget will also remain in focus this week ahead of next week’s deadline for the government to submit its budget to the European Commission for approval. This could see some risk for the euro.
 
Looking further ahead in the week, the calendar picks up slightly on Wednesday, with the release of UK production data and monthly GDP, as well as the US Producer Price Index, and the ECB meeting minutes and US CPI on Thursday. With the US labour market performing strongly, attention will be on the latest inflation figures to determine any adjustments to rate hike expectations going forward.

Today's Economic Calendar

Time Currency Release Consensus Previous
24hr USD Columbus Day
24hr CAD Thanksgiving Day
9:30am EUR Sentix Investor Confidence (Oct) 11.7 12
1:30pm AUD National Australia Bank's Business Confidence (Sep) 5 4

Caxton