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Risk sentiment wobbles as Mexico tariff questions remain

GBP - British Pound

The pound pushed slowly higher through the morning yesterday following the release of stronger than expected UK Services PMI; the index printed at 51.0 vs. forecasts for 50.6.

GBP/USD then kicked on following the release of much weaker than expected US jobs data - the pair came close to breaking through 1.2750, before falling back as ISM Non-Manufacturing PMI from the States printed better than market forecasts a couple of hours later.

It's since settled and opens under 1.27 with investors now focused on the ECB decision this afternoon, US Non-Farms tomorrow and the developing tariff/trade situation.

Key Movers

Still, no agreement has been reached between the US and Mexico on tariffs/immigration and so President Trump is saying tariffs on Mexico will be hiked on Monday. At the same time a couple of ratings agencies have downgraded Mexico's outlook and ratings in the last day, which in turn has lead to a further heavy sell-off in MXN, but also a wobble in global risk sentiment, feeding through to equity prices and alike. US-Mexico talks are due to continue today.

The ECB are also due to make their monetary policy statement today. Interest rates are fully expected to remain on hold, but given the recent run of weak European inflation data, and the change in tone by the Fed, Brexit and global trade tensions, ECB President Draghi may have no other choice than to sound dovish in his statement. The central bank may also announce steps to roll out a 3rd round of TLTROs - a fresh round of financing to credit institutions designed to encourage more lending. It may mean for some volatility in EUR/USD and EUR/GBP in the early afternoon session.

Expected Ranges

GBP/USD: 1.2645 - 1.2740 ▼

GBP/EUR: 1.1210 - 1.1340 ▲

GBP/AUD: 1.8050 - 1.8260 ▲

GBP/NZD: 1.9000 - 1.9260 ▼

GBP/CAD: 1.6950 - 1.7140 ▼