The Pound Dips on Latest Brexit Headlines

The latest Brexit and trade headlines have seen a softer GBP and a stronger USD. UK Manufacturing PMI and politics are in focus today.

Previous Day's Market Highlights

The dollar strengthened on Friday, pushing sterling-dollar below 1.30 and euro-dollar below 1.16. Renewed market focus on trade tensions, particularly with China and Canada, drove support for the greenback, which typically acts as a safe haven in times of uncertainty. The pound rose to 1.80 against a weaker Aussie for the first time in over three months.
 
Of note on the data calendar, Eurozone CPI slowed to 2.0% in August from 2.1% in July. Core inflation also slowed, from 1.1% to 1.0%. Forecasts had been for the rate of inflation to hold steady. The direct market impact was limited but the release likely broadly contributed to the euro’s losses against the firming dollar.
 
Sterling fell as markets opened Sunday evening following weekend headlines that Barnier was opposed to Prime Minister May’s Chequers trade proposals and that May had ruled out a second EU referendum.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1134 1.1248 1.0991 2.28%
GBP/USD 1.2915 1.3044 1.2666 2.90%
EUR/USD 1.1600 1.1734 1.1301 3.69%
GBP/AUD 1.7965 1.8055 1.7284 4.27%
GBP/NZD 1.9540 1.9619 1.9077 2.76%
GBP/CAD 1.6869 1.6987 1.6596 2.30%

Today's Market Highlights

The main releases are this morning’s Manufacturing PMIs from the Eurozone and the UK (09:00, 09:30 BST). A slight pick-up in both indices could prove supportive to the pound and the euro but will likely have an overall limited impact. Otherwise, it’s a quiet calendar given that it’s a bank holiday in both Canada and the US. This means that any movement outside of current ranges would likely be driven by geopolitical headlines, particularly regarding trade and Brexit.
 
Overnight, Australia releases Q2 Current Account data and the RBA announces its latest interest rate decision—widely projected to be a hold on rates at 1.5%. A dovish hold could weaken the Aussie further.
 
The House of Commons returns from its summer recess tomorrow. Other items to keep an eye on this week include the rest of the UK’s PMIs, the Bank of Canada’s interest rate decision, and the US’s August jobs report, including the closely watched NonFarm Payrolls and Average Earnings figures.

Today's Economic Calendar

Time Currency Release Consensus Previous
24hr USD Labor Day
24hr CAD Labour Day
9:00am EUR Markit Manufacturing PMI (Aug) 54.8 54.6
9:30am GBP Markit Manufacturing PMI (Aug) 53.9 54.0
9:30am USD Fed's Evans Speaks
2:30am AUD Current Account Balance (Q2) -22.1B -10.5B
5:30am AUD RBA Interest Rate Decision 1.5% 1.5%
5:30am AUD RBA Rate Statement

Caxton