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Pound falls again as negative Brexit headlines continue to dominate

By Alex Edwards

The pound fell on Monday following the negative Brexit headlines over the weekend, namely Barnier’s reaction to the Chequers proposal. The quid was sold off further following the release of a weaker than expected UK Manufacturing PMI print on Monday, which came in at 52.8 vs. 53.9. In fact, it was the weakest print for 25 months. Meanwhile, the USD continued to strengthen through the day despite it being a public holiday in the US and Canada.

Cable is licking its wounds a bit this morning, but there’s good support at and just under the 1.28 big figure. Perhaps it will get a lift if the current BoE Governor Carney announces today that he will be staying on beyond June next year, this as speculation mounts in the papers. He’s due to hold a press conference this afternoon.

There’s also a smattering of UK economic data to be aware of including Construction PMI and Inflation Report Hearings. As usual, Brexit rhetoric and headlines will no doubt continue to dominate, though.

The US was closed for Labor Day yesterday, so amid thinner trading conditions and with less liquidity in markets, not a lot happened. If anything, the dollar made mild gains as trade tensions continue to rumble on with Trump tweeting a warning to Congress not to interfere in his NAFTA negotiations with Canada.

We could be in for more of the same today but economic data, by way of ISM Manufacturing PMI, will at least garner a bit of attention this afternoon. Traders will also have half an eye on upcoming employment data on Thursday and Friday this week.

A series of PMIs were released from the Eurozone yesterday morning. The Eurozone print came in better than market forecasts but the indices for Germany, France and Italy mostly disappointed, and so the euro was fairly steady early on.

Euro traders now turn their attention to a relatively quiet Tuesday on the domestic economic calendar with only the M/M PPI figures to drive direction. Off-shore releases may also affect the pair however, with ISM Manufacturing PMI due for release in the US. In the meantime, we’re seeing the dollar catch a bit of a bid with EUR/USD falling to fresh week lows this morning.

The Australian dollar spent much of Monday below the 0.72 level, bouncing between 0.7164 and 0.7215 for much of the session. The impetus for the decline was poor domestic data and growing concerns over mortgage rate increases, with the latest salvo from the ABS also hurting the Aussie. M/M Retail Sales was released in Australia on Monday, showing a 0% gain against a forecast of 0.3% growth, a decidedly bearish outcome. The Aussie also felt the impact of disintegrating relations with China and the escalating US-China trade war. Overall, the mix of negative news pushed the Aussie lower.

In overnight news the RBA announced that it will be leaving its cash rate unchanged at 1.5%. The language in the accompanying statement didn’t change too much, citing household consumption as an area of concern and uncertainty and telegraphing that wage growth remains low. AUD/USD has fallen back since the announcement.

AUD/USD is getting sold off fairly heavily in London opening, mostly a result of a strengthening US dollar. It’s back under the .72 figure for now.

The USD/CAD has moved within a tight 30-pip range on Monday mostly due to the fact that markets were closed on Monday who were observing the Labor Day holiday weekend. With no local economic releases for the CAD to take direction from the pair opened at 1.3070, moved 15 pips lower during Asian trade and then touched a high of 1.3103 in the European session.

Looking ahead today we see the release of Manufacturing PMI and more importantly investors will be keenly attuned to tomorrows Bank of Canada monetary policy decision. We are expecting them to hold this month, but we will be watching for clues on a possible October rate hike.

The New Zealand Dollar has moved within a tight range against the U.S dollar but the move was still lower. NZD/USD touched a high of 0.6622 during Asian trade and then began a steady decline on the back of weaker than expected Trade Index. The Statistics New Zealand showed that the Terms of Trade Index improved to 0.6% in the second quarter from -2% in the first quarter but fell short of the market expectation of 1%. The kiwi touched an eventual low of 0.6597 just before the start of Tuesday’s session. Looking ahead at the economic docket we will see the GDT fairy auction take place tonight with an expected increase on the overall price index of about 2%.