GBP - British Pound
During July Sterling managed to shave off 4% of its value and so far August seems to be following suit. Despite the summer parliamentary recess Boris and his team are still ramping up the preparations for a no deal Brexit. With a fresh injection of funding markets are becoming incredibly jittery to the prospect of crashing out and the drop in the Pound is testament to this.
Friday saw the latest PMI release, Construction. UK construction sector output declined for the third month running in July, reflecting lower volumes of work across all three broad categories of activity. The latest reading was up from June's ten-year low of 43.1 but still signalled a marked downturn in total construction activity. Tim Moore, Economics Associate Director at IHS Markit, which compiles the survey was quoted: “UK construction output remains on a downward trajectory and another sharp drop in new orders has reduced the likelihood of a turnaround in the coming months. "Total business activity declined at a softer pace than the ten-year record seen in June, but this should not detract attention from the challenges ahead for the construction sector.
Today we have last of the PMI’s and the one that usually draws the most attention. The Services sector has been forecast to show a slight improvement on the 50.2 reading seen last month. With GBP/EUR hovering at 12 month lows and cable not looking too healthy either its hard to see where the Pound will get its direction from and we expect, at least for the foreseeable, the quid will struggle to gain any momentum.
US/China trade talks have dominated the market at the close of last week and into the weekend with President Donald Trump's abrupt decision to slap 10% tariffs on the remaining $300 billion in Chinese imports, a move that ended a month-long trade truce. A huge sell off in risk has seen a number of key levels broken, the Chinese yuan tumbled more than 1% on Monday, falling below 7 per U.S. dollar for the first time since the 2008 financial crisis. The Aussie , a liquid proxy for emerging market and China risk, slipped to a fresh seven-month trough of 0.6748 after losing 1.6% last week.
The FED pitched last week's rate cut as an ‘insurance’ cut but Friday's Non-Farm payrolls increased by 164,000 jobs in July, fewer than the prior month, and wages increased modestly. This has cemented a view amongst many that the FED will cut rates again in September.
1.2080 - 1.2150 ▼GBP/EUR:
1.0795 - 1.0900 ▼GBP/AUD:
1.7820 - 1.7980 ▲GBP/NZD:
1.8400 - 1.8650 ▲