Daily Currency Update

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Political dust begins to settle

GBP - British Pound

Last week's resounding election victory removed significant uncertainty around Brexit, causing the pound to surge against its major counterparts. The pound spiked up above 1.35 against USD and 1.20 against the EUR before retracting, as the reality of finalizing a trade agreement with the EU and the possibility of a second Scottish referendum sunk in.
Election speculation has been the biggest driver of sterling movement over the last few months so as the political dust now begins to settle, the short-term focus in markets returns to data.
Today sees the release of UK market services PMI at 09.30 am – a number above 50.0 indicates industry expansion while a number below 50 is suggestive of contraction.
Last month’s release produced a figure of 49.3 – a higher reading this time around or a number that takes us above the 50.0 mark could well drive GBP strength.
In an action-packed week of data, we see the release of UK unemployment figures (Tuesday), Consumer Price index numbers (Wednesday), The Bank of England rate decision (Thursday) and finally GDP figures (Friday), all of which could create sterling volatility.

Key Movers

German Markit manufacturing data released at 08.30am this morning produced a figure of 49.4 – the same as last month’s reading. Collective EUR Eurozone PMI data is released at 09.30 this morning with no major changes expected in the region.
Across the pond, the focus will be on detail around the conclusion of the phase 1 trade agreement between the US and China.
The deal still needs to be legally finalized before a presumed signing in January, but the agreement sees US negotiators reportedly offering to significantly reduce existing tariffs on about $360bn (£270bn) worth of Chinese imports.
In return, China has promised to buy large quantities of US soybeans, poultry and other agricultural products - China has also called off additional tariffs that were set to kick in on some US goods, in what appears to be a thawing of relations. However, market reaction to this news has been somewhat muted as traders perhaps wait for further clarity and legal confirmation on a trade war that as that has embroiled financial markets and affected global economies.

Expected Ranges

GBP/USD: 1.3300 - 1.3450 ▲

GBP/EUR: 1.1900-1.2100 ▼

GBP/AUD: 1.9325 - 1.9500 ▲