GBP - British Pound
Friday was a day of huge gains for Sterling after the British currency broke the $1.3150 mark against the U.S Dollar, reaching a one-month high of $1.3175. This came after the leader of Britain’s opposition party, Jeremy Corbyn, made it clear that he is willing to break the current Brexit deadlock and form an acceptable deal that will allow for Britain’s exit from the European Union.
There isn’t any major market-shifting economic data due to be released on Tuesday and therefore Sterling strength will be left at mercy to any new Brexit headlines. Due to the importance of a smooth Brexit for Britain, technical economic data would most likely not move the market greatly anyway, with Brexit sentiment still weighing heavily on the British pound. It is expected that we will see Brexit headlines outweigh technical economic data until there is a more concrete understanding of the upcoming exit process. Trading the pound has become far less volatile over the past 6 months as investors are side-lining the British currency in case they are caught out by any unexpected flash Brexit headlines.
The UK now prepares for a market data loaded end to the week with month-on-month GDP figures and Manufacturing Production data as well as a preliminary quarterly GDP figure, which is expected to be at 0.5%. PM May is also scheduled to meet Sir Graham Brady, chairman of an influential committee of backbench Tory MP’s, where she may set a date for her resignation. This comes after 1922 committee have demanded clarity on May’s future at the helm of Britain. Any clarity on the issue should result in Sterling strength, as an undervalued Sterling is currently being suppressed by the unknown. There is also an expectation that May could release more details on her cross-party customs union deal, which is expected to, at least temporarily, solve the ongoing Irish Backstop issue.
After 50 year record unemployment numbers and better-than-expected nonfarm payroll data, the US Dollar gains were eroded after Trump gave investors a reality check regarding the Sino-US trade talks. Trump has confirmed he will raise tariffs on $200bn of Chinese goods, because the trade deal is escalating “too slowly”. This information was tweeted from Trump’s account where he explained that pre-existing tariffs of 10% would be raised to 25% and a further $325bn of untaxed goods may now be taxed at this 25% rate. Trump may receive some backlash for this, as there is speculation that China may reciprocate on US goods. In other news, despite weaker-than-expected inflation data came out from the area, the Australian dollar rose sharply on Tuesday morning after interest rates were held at its record low level.