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Sterling ticks higher as UK/EU discussions continue

Monday 25 February, 2019

Daily Currency Update

The pound is higher this morning with GBP/USD approaching the 1.31 level on the back of ongoing Brexit negotiations between the UK and the EU. As talks between the two sides continue a planned parliamentary vote scheduled for Wednesday on Theresa Mays withdrawal agreement has been pushed back a week as May tries to hammer out an agreement that will be palatable for Brexiteer backbenchers. Away from Brexit we have Bank of England Governor, Mark Carney discussing the latest BoE Inflation Report with the Treasury Committee tomorrow. GBP/USD trades at 1.3085.

Key Movers

The dollar is stronger this morning owing to the GDP beat yesterday. Later on, US Treasury Secretary Steven Mnuchin commented on the state of the economy saying the US economic outlook was very strong. However, he warned there was still some work to do with regards to a trade deal with China. We also had the monthly Chicago PMI release, which is a monthly health check of the economy in the Chicago area. This posted a very healthy 64.7, up from last month’s 56.7. Traders now turn their attention to today’s ISM Manufacturing PMI.
There was little European data yesterday. However, a Reuters poll of economists showed that virtually all expect no change in policy from the ECB next week at its monetary policy meeting. They were also evenly split over whether benchmark rates would be raised this year or next. Given the recent slowdown in the Eurozone, a lot expect the bank to re-launch its cheap loans programme (Targeted Long-Term Refinancing Operations) in the next few months. EUR/USD is at 1.1370 with GBP/EUR at 1.1650, with market participants looking to a series of European PMIs.
AUD/USD is lower this morning despite an uptick in Asian equities and the release of better than expected China Manufacturing PMI. It’s owing to the stronger USD, itself a direct result of the better than expected US GDP.
The Canadian dollar is stronger this morning, buoyed by an improvement in risk appetite and increasing oil prices. Canadian GDP is due for release today and will be the main focus for USD/CAD traders. Markets are expecting a flat reading of 0.0% m/m.
NZD/USD has traded a very narrow range since falling 50 odd points following the release of stronger than expected US GDP yesterday. Investors will continue to look to US data into the end of the week for direction, but it may well be a quiet finish for the kiwi. It opens in London at .6810.

Expected Ranges

  • GBP/USD: 1.3190 - 1.3320 ▼
  • GBP/EUR: 1.1600 - 1.1720 ▼
  • GBP/AUD: 1.8600 - 1.8740 ▼
  • GBP/CAD: 1.7300 - 1.7620 ▼
  • GBP/NZD: 1.9340 - 1.9600 ▼