• Central bank concerns knock Australian Dollar
  • US-China trade still driving currency markets

Hard lines

Sterling slipped this morning on the news that Boris Johnson plans to take a hard position on the Brexit transition period and to utilise the Withdrawal Bill so there would be no extension to the transition. This is in stark contrast to the Pound’s push upwards following the UK General Election.
Johnson’s approach would mean the UK needs to have a firm agreement and plans secure its exit the EU by the 31st December 2020 deadline, raising the risk of no deal Brexit once more and making markets nervous. However, markets do not consider a no deal Brexit a likely outcome just yet. Some commentators suggest that this announcement from the UK Prime Minister is further assurance that he will keep to his word and “get Brexit done”. What the markets are nervous about is how and when this will happen, and the Pound is once again paying the price of Brexit butterflies.

Central bank concerns knock Australian Dollar

Cautious rhetoric from the Australian central bank, the Reserve Bank of Australia (RBA), also caused the Australian Dollar to dip overnight, falling 0.2% on word that the RBA could slash interest rates early in 2020, particularly if economic pressures in Australia continue, such as income and employment. The central bank has concerns that wage growth has not increased in line with inflation or household spending.

US-China trade still driving currency markets

The US-China trade tensions continue to drive a raft of key currencies worldwide, as markets eagerly await further progress following last week’s temporary trade agreement between the two powers. Investors’ flight to safe haven currencies seems to be calming down, and those currencies usually more sensitive to global risk are finding support in the markets’ more positive sense of direction.

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Mixed data diary today – no support for Sterling

Today’s data diary focuses on employment data for the UK, which is broadly in line with expectations.

The Eurozone’s Trade Balance results will be important for the Euro: any improvement in these figures could provide a boost for the single currency, particularly as Sterling slips from its improved position last week.

Later in the day, the latest US construction and industrial data will be released, and could provide further support for the US Dollar, already climbing against the Pound. Canada’s data highlights today include manufacturing data, which is expected to show a small contraction, given global trade concerns and disappointing data in previous months.

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