British money, three pound coins descending stacks. New silver and gold coins introduced in 2017.

 

  • Pound against Euro left no surprises 
  • China cut tariffs on US goods as virus fears keep growing
  • President Donald Trump acquitted by Senate

 

UK data will play a larger part in determining the near term direction of the Pound. Purchasing Managers’ Index (PMI) data this week has been broadly positive, particularly services which came in at 53.9 well ahead of expectations. The Bank of England (BoE) elected to leave interest rates on hold last week which now seems justified. The chance of a rate cut in March are receding and more positive news on the data front could see Sterling continue to rise as traders reprice risk.

 

British pounds banknotes

British pounds banknotes

 

Brexit negotiations: how much will this influence the direction of the Pound?

The UK Government are changing the language of Brexit from deal/no deal Brexit to Canada style/Australia style trade deal. Trying to shift the public’s mind set away from positive/negative mentality and moving on from “Brexit”.

Negotiations will start in earnest (hopefully) early March between the UK and EU and posturing from both sides will move the market as we saw on Monday. The dispute between Barnier and Boris Johnson is influencing negatively the direction of the Pound, which is temporarily losing out as the market viewed his red lines as increasing the chance of no-deal Brexit Australian style trade deal, and the World Trade organisation (WTO) level of trade relationship is seen as harming the UK economy growth prospects.

 

Pound against Euro left no surprises

After a strong performance in mid-December the Pound has been trading in a wedge pattern against the Euro with 1.1920 being January’s double top and congestion between 1.1640-1.1730. Both central banks, Bank of England (BoE) and European Central Bank (ECB) elected to leave rates on hold in January, no surprises and no market reaction.

 

 

China cut tariffs on US goods as virus fears keep growing

China plans to halve tariffs on 1,717 goods it imports from the US as the country faces the fresh challenge of the Coronavirus. The tariff cuts, which cover $75bn of US goods coming into China, will take effect on 14th February. Risk has been put back on as it was reported that a vaccine was close to being developed however rumours that the real death toll has been suppressed by authorities may weigh on sentiment.

 

President Donald Trump was acquitted

And President Donald Trump has been cleared in his impeachment trial, ending a congressional bid to remove him from office that bitterly divided the US. The Senate, run by the president’s fellow Republicans, voted to acquit him 52-48 on charges of abuse of power and 53-47 on obstruction of Congress. The move was widely anticipated and therefore there was little effect on markets. Mr Trump has begun his re-election campaign on the back of a strengthening economy, improved approval ratings and with the Democrats in disarray he is increasingly confident of winning a second term.

 

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