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Sterling slips on continued Brexit uncertainty.

By Jake Trask

Brexit uncertainty continues to dominate the pounds moves with a fall in its value seen after a breakthrough in negotiations failed to materialise yesterday in Brussels. Possibly a little optimistically, some were expecting Attorney General, Geoffrey Cox to confirm a breakthrough in Brexit negotiations re: the Irish border text however these hopes were dashed and sterling slipped as a result. GBP/USD had been pushing back towards the 1.32 handle but pared these gains and retraced to 1.31, finding solid support at the big number. Later in the day comments from Bank of England Governor, Mark Carney helped recover some lost ground as testimony before members of the House of Lords showed he saw interest rates rising quicker than markets expecting should a Brexit deal be done. Yesterday also saw the release of the monthly Services PMI from the UK which unsurprisingly highlighted the economy has ground to a halt, predicting growth of just 0.1% for the first quarter as business decisions are delayed until Brexit is sorted. Cable currently trades at 1.3145.

Yesterday’s ISM Non-Manufacturing PMI posted an impressive 59.7 pushing up a full three points since last month’s survey and its 115th consecutive monthly print above 50. The greenback remains well bid as the US/China trade dispute rumbles on however hopes persist that we will see some sort of breakthrough by the end of the month. Today’s big event from the States is the ADP Non-Farm Employment Change number with markets expecting around 190k to be added to payrolls for the month. Fridays Jobs report is the weeks big event with the Average hourly Earnings figure likely to be the main talking point, an uptick of 0.3% is eyed. EUR/USD is at the lower end of its recent range at 1.13. USD/JPY briefly traded above 112 yesterday but is back down to the 111.81 level now.

Tomorrow’s European Central Bank interest rate decision looms ever nearer with no change in policy all but guaranteed but some expecting confirmation of a reintroduction of its cheap bank loans programme. Tomorrow could be too soon for an announcement as by the end of the month we could have resolved Brexit and the China/US trade dispute which will help confidence in the bloc no end leading the bank to shelve the plan. GBP/EUR sits at 1.1630.

The aussie dollar has had a miserable night as the latest quarterly GDP figures fell well short of expectations. Growth for the fourth quarter of 2018 was expected to show 0.5% however the data came in at 0.2% sending the local buck tumbling. Earlier on Reserve Bank of Australia Governor Philip Lowe said it was difficult to imagine rates rising this year with Macquarie bank joining Westpac in expecting two cuts by year end. Tonight’s next evidence of the health of the economy comes by way of Retail Sales numbers for January with 0.3% growth predicted. AUD/USD has slipped to .7030 with GBP/AUD up to 1.87.

USD/CAD remains elevated as we near todays interest rate decision from the Bank of Canada. No change in policy is expected to be announced from bank chief, Stephen Poloz however he could point to a gloomy outlook for the economy which may dampen rate hike expectations. At the same time we have the latest Ivey PMI number and a little earlier in the day trade balance figures. It could be a choppy day for the loonie. USD/CAD is at 1.3365 with GBP/CAD 1.7575.

As is so often the case the aussies woes dragged the kiwi lower with NZD/USD falling to around .6750 from .68 after last nights poor data from its neighbour across the Tasman Sea. A breakthrough is needed in the China/USD trade dispute to restore confidence in the global economy and help aid the antipodeans. GBP/NZD is at 1.9390.