The dollar strengthened through the day yesterday, seeing GBP/USD fall to a four month low on Tuesday. It was a similar theme in other major currency pairs as market participants keenly awaited Trump’s speech on the Iran nuclear deal. Markets were busy selling the fact, even in advance of the fact, with WTO crude falling below 70.00 to a low of sub 68.00.
Fortunes turned mildly for the pound come the late afternoon London session as news broke that Japan’s Takeda Pharmaceutical had agreed to buy the UK-listed Irish drugmaker Shire for $46 billion. Cable pushed back through the 1.35 figure and on to a high of 1.3560. It’s retraced again however, and as Trump inevitably announced that the U.S. would pull out of the Iran nuclear deal, dollar strength pulled through, mostly on safe haven demand. European leaders are, however, pledging to uphold the pact, but whether that carries much sway we’ll have to see. For now, volatility in oil and commodity linked currencies looks set to continue.
Markets remain jittery this morning, oil is back through $70.00 (in fact it’s looking like it will push through $71.00 very shortly), but GBP/USD seems steady, perhaps as investors take a cautious approach to trading in advance of the Bank of England monetary policy announcement tomorrow. As far as markets’ are concerned it’s less about will they or won’t they hike rates (they won’t!), more about whether they’ll be leaving the door open to a hike in August, as our esteemed colleague Jake Trask pointed out in his interview with Bloomberg this morning.