ECB Takes Centre Stage

With a very quiet week for the pound, the focus this week lies with the European and Canadian central bank meetings.

Previous Day's Market Highlights

With little in the way of major UK data releases on Friday, disappointment that a Brexit deal could not be reached a day earlier at the EU summit continued to weigh in on the pound, reaching a weekly low of 1.1310 against the euro and 1.3010 against the greenback.  However, we did see UK private sector borrowing fall to a 16-year low at 3.3B against a forecast of 4.6B, which was some welcomed news for chancellor Hammond ahead of his autumn budget this time next week.

The main economic data on Friday came from Canada as investors looked for final confirmation of an interest rate hike scheduled later this week. However, both readings were expected to decline by 0.1% but surprised investors as both fell by 0.4%. It is not thought that this will be enough to delay the decision, however we did see the Loonie retract 1% against the pound, with GBP/CAD climbing from 1.6970 to 1.7150 over the course of the afternoon.

In addition, we also saw the euro stage a slight recovery against the dollar following a week of decline driven predominately by the Italian budget situation. The downward trend was met resistance at 1.1430 and continued to climb above a 1.15. 

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1330 1.1463 1.1112 3.06%
GBP/USD 1.3080 1.3298 1.2922 2.83%
EUR/USD 1.1540 1.1815 1.1436 3.21%
GBP/AUD 1.8370 1.8735 1.7937 4.26%
GBP/NZD 1.9830 2.0481 1.9554 4.53%
GBP/CAD 1.7107 1.7286 1.6598 3.98%

Today's Market Highlights

With a very quiet week for the pound, the focus this week lies with the European and Canadian central bank meetings. The ECB have been clear in their intentions to hold interest rates “at least through the summer of 2019”, and investors will expect Draghi to reiterate this position in his press conference. However, investors will also be looking for clarification of President Draghi’s comments concerning a “relatively vigorous” pick-up in underlying inflation in the Eurozone and what it could mean for monetary policy post-summer 2019.  At previous meetings this year, the Euro has weakened on the back of central bank comments, therefore this presents another downside risk to the euro.  

Assuming last week’s data releases haven’t derailed the BoC’s plans, investors a forecasting an interest hike of 25 basis point to 1.75% on Thursday.

Other key data releases this week include European flash composite PMI on Wednesday expected to edge down slightly. This is to be followed by the first reading of Q3 GDP in the US, expected to decline to 3.3% followed a robust reading of 4.2% in Q2. 

Today's Economic Calendar

Time Currency Release Consensus Previous
3:00am CNY RBA Assist Gov Debelle Speaks
11:30am EUR German Buba Monthly Report
1:30pm CAD Wholesale Sales m/m 0.1% 1.5%

Caxton