GBP/USD Recovers from 3-Week Lows

GBP/USD hit a 3-week low yesterday but has recovered towards 1.30 this morning. Key today are a speech from PM May and Services PMIs from the US & UK.

Previous Day's Market Highlights

The pound fell below 1.30 against the dollar yesterday for the first time since 12 September, hitting a three-week low as the greenback strengthened amidst risk-off sentiment as equities came under pressure. The dollar also gained against the euro, reaching its strongest levels against the single currency since 21 August. Sterling bounced slightly on Boris Johnson’s calls to back Theresa May, despite criticizing the Chequers plan; however, there remain sharp divisions within the party.
 
Overall, it was a quiet calendar day. Highlights included UK Construction PMI, which slipped more than forecast but had a limited impact on a pound that was already under pressure, and a speech from Fed Chair Powell after the European close, in which he was upbeat on the economy and supported the current path of rate hikes.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1224 1.1302 1.1047 2.26%
GBP/USD 1.3000 1.3298 1.2785 3.86%
EUR/USD 1.1582 1.1815 1.1526 2.45%
GBP/AUD 1.8118 1.8401 1.7826 3.12%
GBP/NZD 1.9760 2.0031 1.9571 2.30%
GBP/CAD 1.6668 1.7190 1.6598 3.44%

Today's Market Highlights

The euro jumped early this morning on reports that Italy plans to cut its budget deficit to 2% in 2021 from a projected 2.4% in 2019. Sterling-euro fell within the 1.12-1.13 band and euro-dollar headed higher towards 1.1590. The resulting dollar weakness helped sterling-dollar recover 1.30.
 
There’s more to speak of on the data front today. The UK wraps up its PMI releases for the month with the Services index (09:30 BST), also forecast to slip, which could weigh on the pound. Markets will keep a close eye on a speech from Prime Minister May at the Conservative party conference today for the latest insights into Brexit and domestic politics.
 
The US releases ADP Employment Change, forecast to increase, and the ISM Non-Manufacturing PMI, forecast to slip, which could provide some mixed signals for the dollar. Fed speeches continue today. Barkin will be speaking on the economic outlook, Brainard on payments, Mester at a community banking conference, and Chair Powell as part of a panel discussion at The Atlantic Festival.

Today's Economic Calendar

Time Currency Release Consensus Previous
9:30am GBP Markit Services PMI (Sep) 53.9 54.3
11:30am USD Fed's Evans Speaks
1:05pm USD Fed's Barkin Speaks
1:15pm USD ADP Employment Change 185K 163K
2:45pm USD Markit Services PMI (Sep) 53.6 52.6
3:00pm USD ISM Non-Manufacturing PMI (Sep) 58.0 58.5
3:30pm USD EIA Crude Oil Inventories (28 Sep) 1.132M 1.852M
7:00pm USD Fed's Brainard Speaks
7:15pm USD Fed's Mester Speaks
9:00pm USD Fed Chair Powell Speaks
2:30am AUD Trade Balance (Aug) 1,400M 1,551M

Caxton