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US - China tensions remain the focus

GBP - British Pound

In the absence of any material news yesterday from Boris Johnson or No.10 the pound managed to stage a small recovery almost behind investors' backs as the market was busy looking elsewhere. How many days the pound will be able to do this will be limited, however looking at my calendar this morning there are only around 25 working days for parliament to sit due to the summer recess followed by party conferences.

Meanwhile a group of 24 MPs across the house have started their legal bid to stop Boris Johnson from shutting down or proroguing in another bid to stop the Prime Minister bringing the UK out of the EU in a no-deal Brexit scenario.

Key Movers

Riskier assets including equity markets were cut a break yesterday and recovered slightly as the fallout from the drop in the Yuan began to settle. The People's Bank of China is fixing its yuan rate just below the significant 7.0 level to warn the US in the on-going trade dispute that it is willing to use it's currency to dampen the impact of tariffs imposed on Chinese imports into the US. The difficulty is that China can't admit directly to this and at the same time they can't weaken its currency too much that investors loose confidence and withdraw funds. It's a difficult tightrope China has to walk. Some of the classic safe havens are enjoying this risk off environment at the moment with the Japanese Yen taking first prize yesterday whilst gold took top spot for the commodities as it rallied to $1500 an ounce, its strongest level since 2013.

Elsewhere, the Reserve Bank of New Zealand threw the book about forward guidance out of the window overnight as it surprised the market by doubling its anticipated rate cut. Forward guidance at the moment is very fashionable with the Fed, ECB and Bank of England some of its popular users but it is by no means a written rule and the move from the RBNZ shows the waves that central banks can send through the market. With the RBNZ cutting rates by 50bps instead of 25 bps as expected the Kiwi has dropped 2% across the board whilst its antipodean neighbour, the Aussie, was also rattled and dropped once more against the US dollar to its lowest level in over 10 years.

Expected Ranges

GBP/USD: 1.2145 - 1.2210 ▲

GBP/EUR: 1.0845 - 1.0920 ▲

GBP/AUD: 1.7980 - 1.8180 ▲

GBP/NZD: 1.8900 - 1.9025 ▲

GBP/CAD: 1.6140 - 1.6220 ▲