Daily Currency Update

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Dollar slips on dovish Fed

GBP - British Pound

GBP/USD regained the 1.25 handle yesterday as solid (if unspectacular) data and dollar weakness aided a recently battered pound. UK GDP numbers for April-May showed an uptick of 0.3% after the previous month's miserable, Brexit affected drop of -0.4%. UK Manufacturing Production also bounced back from a revised lower -4.2% to 1.4% for the same period, slightly less than forecast but a solid rebound none-the-less. GBP/USD pushed up from around 1.2445 at the start of the European session to briefly test 1.25 by mid-morning before retracing. The impetus needed to push above the big number was provided by the Fed at lunchtime seeing cable top out at 1.2525.

Little support was given to the pound by Tuesday night's debate between Tory leadership hopefuls Jeremy Hunt and Boris Johnson as nothing new was gleaned from the jousting and it seems glaringly obvious whoever comes to power will be lumped with same Brexit problems as predecessor Theresa May. Ongoing uncertainty looks likely to apply continued downward pressure to sterling until the new PM is confirmed and for a while after also. There is a rising chance we may see a general election to give the public a chance to reshuffle the pack in an effort to unblock the deadlock ahead of the UKs intended departure date. Tory members are currently returning their postal ballots ahead of the announcement of the new PM the week after next.

Key Movers

Yesterdays big news was dovish testimony from Federal Reserve Chairman, Jerome Powell on the first day of two before lawmakers in Washington. The main move lower for the dollar came as Powell's prepared remarks were published at around 1:30pm UK time. Uncertainties over the US economy on the back of the US/China trade impasse, continually under target inflation and little pipeline pressures from wage growth were given as reasons for the Fed to consider easing policy at the end of this month. Markets have fully priced in a 25bp cut for the 31st July with a 25% chance the Fed may chooses to drop the benchmark rate by 50bp. Later in the day the minutes of the June FOMC interest rate decision were published with confirmation that more policy makers were turning dovish on rates. The publication did little to move the greenback as the earlier statement from Powell was the main mover throughout the US session.

Americas northern neighbour chose the leave rates unchanged at 1.75% yesterday as Bank of Canada Governor, Mark Poloz looked to balance an improved domestic situation with an occluded outlook overseas. Again, US/China trade tensions were the main cause for concern and with The Fed and European Central Bank looking to cut rates soon as well as the Bank of Japan seemingly on a never ending easing cycle there seems little likelihood the BoC will be tightening policy anytime soon. Like against most crosses the dollar was the loser on the day with USD/CAD back under 1.31.

Today's main highlights include the second day of testimony from Fed Chairman, Jerome Powell, the minutes from the ECB's last monetary policy decision and US inflation figures. EUR/USD trades around 1.1270 with USD/JPY down to 108.10

Expected Ranges

GBP/USD: 1.2470 - 1.26 ▲

GBP/EUR: 1.1090 - 1.12 ▲

GBP/AUD: 1.7880 - 1.8040 ▼

GBP/NZD: 1.8720 - 1.89 ▼

GBP/CAD: 1.6290 - 1.6450 ▼