Pound slips after Tory leadership debate
Wednesday 10 July, 2019
Daily Currency UpdateGBP - British PoundLast night saw the much anticipated Tory leadership debate between Jeremy Hunt and Boris Johnson on ITV. As expected the debate centred on Brexit with the two clashing repeatedly on the subject without actually revealing much we didn't already know. They both insisted they were determined to leave the bloc on Halloween however Hunt seemed more inclined to extend the deadline should it be absolutely necessary. With any exit strategy having to get parliamentary approval and the EU again and again saying the withdrawal agreement is not up for renegotiation, including the contentious Irish Backstop, it seems whoever gets the gig will likely find themselves hamstrung by the issue as Theresa May was throughout her tenure as PM. This raises the likelihood that we could be heading for a general election once the next Tory leader/Prime Minister is confirmed the week after next.Sterling was relatively unmoved throughout the debate however Brexit uncertainty continues to weigh on the pound dragging it lower across most of traded peers. This morning sees key data from the UK with April-May GDP expected to rebound from -0.4% to 0.3% and Manufacturing Production also expected to jump to 2.2% from -3.9% the previous month. Regardless of the prints we can expect both reports to highlight Brexit uncertainty as affecting the UK economy which is looking like its ground to a halt in Q2.GBP/USD sits around 1.2450 with GBP/EUR around 1.11, pushing through the key market level resistance level of EUR/GBP .90.
Key MoversToday is the beginning of a key 48 hours for the US dollar with tonight's release of the minutes from the latest Federal Open Market Committee interest rate decision being book-ended by appearances from Fed Chairman Jerome Powell at the Seminannual Monetary Policy Report hearings in Washington DC. Powell is due to give testimony today and tomorrow before the House Financial Services Committee on the state of the economy and monetary policy. His words are likely to be pored over by the markets for clues on the path of future interest rates. A July cut seems like a done deal however big questions remain over what action the Fed may, or may not take throughout the rest of 2019. We should expect some volatility in all dollar crosses throughout the next 48 hours as the markets digest the discussion/minutes. Overnight saw yet more bad news for the Aussie with the latest Westpac Consumer Sentiment report posting its fourth consecutive drop with -4.1 shown. The report stated the drop was "troubling" given the recent cut in rates by the RBA, a resumption of talks between the US and China over trade and a stabilising housing market in Melbourne and Sydney. AUD/USD is close to breaking below .69 as a result. Today sees the Bank of Canada's interest rate decision at 3pm with no change in policy expected. Its another quiet day in the Eurozone however we finally get something to discuss tomorrow as the minutes of its latest interest rate decision are published. EUR/USD trades around 1.1215 with USD/JPY just under 109.
- GBP/USD: 1.24 - 1.2540 ▼
- GBP/EUR: 1.1050 - 1.1210 ▼
- GBP/AUD: 1.7960 - 1.8120 ▲
- GBP/NZD: 1.8820 - 1.90 ▲
- GBP/CAD: 1.63 - 1.6460 ▼