Sterling Hits Six-Week Highs

GBP/USD hit six-week highs yesterday on Brexit reports and softer US CPI. A speech from BoE Gov Carney and US Retail Sales are in focus today.

Previous Day's Market Highlights

The pound hit 1.31 against the dollar yesterday for the first time in six weeks, in part on a report that the UK and EU had made progress on the Irish border issue. This follows a spate of more positive headlines that have helped the pound recover from lows around 1.2666 that were hit in mid-August when markets had priced in rising fears of a no-deal Brexit. Since then, cable has recovered around 3.5%.
 
Sterling’s move higher was also helped by a softer US dollar, which weakened on under-forecast CPI figures. This saw euro-dollar jump over 50 pips and test 1.17 for the first time in nearly two weeks.  
 
Yesterday’s BoE and ECB meetings contributed to sterling and euro gains but overall provided few surprises. The BoE raised its Q3 economic growth forecasts and voted unanimously to keep interest rates on hold, as expected. The ECB kept its inflation projections unchanged, slightly cut growth projections, and confirmed that it expects to wind down asset purchases by the end of the year. The euro firmed slightly during the press conference as Draghi was perhaps less dovish than expected.
 
The lira rallied as Turkey’s central bank raised interest rates to 24% from 17.75%, a move that was larger than expected.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1205 1.1266 1.0991 2.44%
GBP/USD 1.3116 1.3123 1.2698 3.24%
EUR/USD 1.1706 1.1734 1.1367 3.13%
GBP/AUD 1.8202 1.8377 1.7414 5.16%
GBP/NZD 1.9912 2.0031 1.9167 4.31%
GBP/CAD 1.7039 1.7190 1.6596 3.46%

Today's Market Highlights

BoE Governor Carney will be speaking in Dublin this morning (11:00 BST). Markets will keep an eye out for any monetary policy or Brexit headlines. In the afternoon, the US release Retail Sales (13:30). Softer sales growth could weaken the dollar.
 
Highlights next week include the UK’s August inflation and a speech from ECB President Draghi at the Making Europe’s Economic Union Work conference on Wednesday.

Today's Economic Calendar

Time Currency Release Consensus Previous
10:00am EUR Trade Balance s.a. (Jul) €16.3B €16.7B
11:00am GBP BoE Governor Carney Speaks
1:30am USD Retail Sales MoM (Aug) 0.4% 0.5%
1:30am USD Core Retail Sales MoM (Aug) 0.5% 0.6%
2:00pm USD Fed's Evans Speaks
2:15pm USD Capacity Utilization (Aug) 78.2% 78.1%
2:15pm USD Industrial Production MoM (Aug) 0.3% 0.1%
3:00pm USD Prelim Michigan Consumer Sentiment Index (Sep) 0.3% 0.1%

Caxton