GBP - British Pound
Away from the rising trade tensions between the US and China the market is also keeping its eyes on any Brexit developments and the big news overnight is that Boris Johnson has no desires to go back to Brussels and renegotiate the Withdrawal Agreement. If true, this flies in the face of the assumptions made by many investors that assumed the new Prime Minister was just posturing with Brussels before going back to the negotiating table ultimately leading to another Brexit extension.
For Johnson, the prospect of not renegotiating the Brexit deal makes sense, particularly with the Conservative party losing the Brecon and Radnorshire by-election last week which saw the government's tiny majority halved. With such a small majority the chances of the PM getting any renegotiated deal through would be improbable so instead reports point to Johnson and his advisors planning a 'people vs politicians' campaign.
This spells further bad news for the pound with volatility only set to increase. Indeed sterling at the moment is acting more and more like an emerging market currency, characterised by political uncertainty and high volatility.
Away from all of this (almost) yesterday UK Services PMI marginally beat expectations and helped keep the UK afloat ahead of Friday's important GDP numbers.
It was a torrid time for riskier assets in the market yesterday as US stocks had their worst day so far this year. On the flip side, the safety of US treasury bills saw yields drop as investors drove up its demand and price. This all comes off the back of Donald Trump officially labeling China a currency manipulator, the first US sitting President to do since Bill Clinton.
In terms of the story and relationship between the US dollar and the trade war the story has evolved and changed extensively since escalations started in 2018. Last year the US Dollar benefited in the face of the trade tensions, as investors supported the currency however more recently the trade war has caught up with the US economy, leading the Federal Reserve to recently cut interest rates by 25bps. Curiously, and despite the optimistic tone from the Fed last week, the market is now fully expecting another interest rate cut in September and possibly in December. At present the Dollar is therefore suffering. EUR/USD is creeping back towards the 1.1200-1.1250 range whilst the Swiss Franc and Japanese Yen, the vintage safe haven currencies, are also booming.
1.2080 - 1.2170 ▲GBP/EUR:
1.0810 - 1.0900 ▲GBP/AUD:
1.7880 - 1.7990 ▼GBP/NZD:
1.8560 - 1.8680 ▲