Daily Currency Update

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Risk is back as Trump delays tariffs

GBP - British Pound

UK data yesterday provided some welcome news amongst the backdrop of negative sentiment in the UK. Average earnings figures for June rose to an 11-year high, increasing from 3.6% to 3.9%. UK unemployment rate figures for June, however, rose above expectation from 3.8% to 3.9%, although this is still relatively low in historic terms and was counteracted by the claimant change release, this number showed only a 28k increase compared to the 42k that was to be expected. Tej Parikh, the Chief Economist at the Institute of the Directors (IoD), commented: ‘The jobs market remains a source of strength for the UK economy, though it may now be reaching its peak.’
‘High employment has proved a lifeline for the economy in a difficult period. With so many people in work, solid household incomes have kept consumer spending fairly buoyant while the production and construction sectors have waned.’

On to Brexit and the ever changing landscape. The UK’s Speaker of the House of Commons, John Bercow recently became a strong force against the Prime Minister Boris Johnson’s “do or die” pledge. Mr. Bercow showed readiness to stop the no-deal Brexit by all means. Additionally, ex-Chancellor Philip Hammond wrote a letter to the no10, signed by 20 other members of the Parliaments that shows the PM ruins chances of any deal with the EU.

Price action has been fairly muted given Brexit developments with cable moving between the ranges of 1.20 and 1.21. Todays talking point will be UK CPI where 1.9% is expected. A move below the BOE target of 2% will add further fuel to any rate cut speculation and could place further pressure on the pound.

Key Movers

Global risk markets were given a boost yesterday which has been reflected in the price of the antipodeans following news that the US and Chinese communications over trade seem to be finding traction and that talks were taking place over the phone where arrangements were being made for subsequent continuation meetings in September. Additionally, the Trump administration said it will delay imposing the 10% tariff on some Chinese products until mid-December.

Meanwhile, US CPI printed in line with market expectations in July at 0.3% MoM, pushing annual inflation up 0.2%pts from June to 1.8%.

China’s July month Year on Year data revealed that the Retail Sales grew 7.6% versus 8.6% forecast whereas the key Industrial Production growth came in as 4.8% against 5.8% expected. Previously, Australia’s second quarter (Q2) Wage Price Index grew 0.6% compared to 0.5% market consensus on a Quarter on Quarter basis.

Traders will now focus on the speech by the Reserve Bank of Australia’s (RBA) Assistant Governor (Risk Management Committee) Guy Debelle for the central bank’s reaction to the latest data releases.

Expected Ranges

GBP/USD: 1.2030 - 1.2070 ▼

GBP/EUR: 1.0760 - 1.0790 ▼

GBP/AUD: 1.7620 - 1.7820 ▼

GBP/NZD: 1.8580 - 1.8780 ▼