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Brexit worries push GBP/USD below 1.30.

By Jake Trask

It was another miserable day for the pound yesterday as ongoing Brexit concerns pushed cable below 1.30 for the first time in nearly three weeks. UK Prime Minister, Theresa May’s impossible job is getting harder by the day as the rumblings of disquiet from her backbenchers and from the Democratic Unionists who prop her up grow louder. In a speech in parliament yesterday the PM stated the terms of the UK’s exit were 95% agreed however the Irish border was still a “considerable sticking point.” It’s going to be another tricky week to negotiate for May as she is due to meet the Conservative 1922 committee of backbenchers tomorrow however there may be some brief respite and distraction from the Chancellor, Philip Hammonds budget which is due to be unveiled on Monday next week. Away from Brexit, Bank of England Governor, Mark Carney is due to give a speech this afternoon in Toronto however there’s little chance of him talking about monetary policy. GBP/USD is currently at 1.2980.

The dollar is weaker across the board this morning as the political dispute between the US and Saudi Arabia over the death of Saudi journalist Jamal Khashoggi remains in the headlines. The next driver domestically for the dollar will be this Fridays Q3 GDP reading from the States which is expected to show a moderation from Q2’s annualised 4.2% growth. Economists expect the data to show the purple patch the US economy has been enjoying may be coming to an end with a fall to 3.3% growth penciled in. Aside from Thursdays Durable Goods orders it’s a data-thin week from the States so ongoing political jousting from US President, Donald Trump will be the markets main focus, especially as we near the mid-term elections next month. EUR/USD is at 1.1470 with USD/JPY trading at 112.40.

Italian bond yields which fell after the affirmation of Italy’s stable outlook by credit agency Moodys on Friday have begun to rise again. Tensions over the economic proposals are hitting risk sentiment today with the yen amongst the main benefactors of these concerns. This will be the main story today (and indeed for a while) however we will get some brief distraction tomorrow as the monthly PMI numbers are released from the Eurozone before Thursdays interest rate decision from the ECB. GBP/EUR is around 1.1325.

AUD/USD is making another play for the .71 handle as some dollar weakness permeates the markets at the start of the European session. All major stock markets are lower which would normally not favour the commodity currencies however it seems a reluctance at the moment to buy the greenback is helping aid a recovery in the Aussie. It’s dead a dodo Down Under this week so events further afield will dictate the local bucks moves. GBP/AUD trades at 1.8330.

Last week’s CPI and Retail Sales miss from Canada continues to weigh on the loonie however we may get a change in fortune for CAD should tomorrow see a rate hike and hawkish signal from the Bank of Canada. BOC chief Stephen Poloz is expected to raise the benchmark Overnight Rate to 1.75% from 1.5% so the message he sends re: the future path of tightening that will be the main area of focus. GBP/CAD trades at 1.70.

Like the Aussie, the Kiwi is recouping some of its recent losses at present as a move lower in USD/JPY helps the commodities gain in a slightly unusual move. Tomorrow night’s Trade Balance figure from NZ is the only domestic event of interest this week. GBP/NZD sits at 1.9770.