GBP - British Pound
Sterling stayed fairly muted on Thursday after Boris Johnson showed why he is the frontrunner in the Tory leadership race. The ex-foreign secretary received 114 votes, nearly three times the number of his nearest rival, Jeremy Hunt, who received 43. Three Tory candidates were eliminated from the leadership race, as they were unable to rally the 17 votes of support needed. GBP/USD initially jumped past $1.27 as clarity surrounding the future of British politics is good for the currency, however as Thursday went on, the pound weakened and retraced back down towards $1.2670.
The race picks up again on Tuesday where the second ballot takes place. The threshold to proceed is raised to 10% and as the week continues, more candidates will be eliminated until the final 2 candidates remain. Sterling is expected to remain fairly muted over the coming months until a new PM is elected and there is greater clarity around how Brexit will be managed. Both Hunt and Johnson are open to the idea of a no deal Brexit, however both claim it is not their preferred option.
The U.S Dollar stayed fairly muted on Thursday as investors look towards next week’s Fed meeting for news on possible rate cuts. With trade tensions rising and more frequent negative economic technical data released from the US, the FOMC meeting on Tuesday is extremely important to global growth. USD is currently being propped up by weakness from other currencies, such as Sterling and Euro, rather than the strength of the dollar.
The ongoing trade tensions seem to be affecting both China and the US. Overnight, Chinese Fixed Asset Investment and Industrial Production figures both missed target, pulling equity markets lower. In other news, NZD sank overnight as domestic BusinessNZ manufacturing PMI came out lower-than-expected and spillovers from Australia and China dented the currency. US retail sales data will be released later today.