Daily Currency Update

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Sterling slips as Carney signals stimulus

GBP - British Pound

It was another rocky day for the pound yesterday as GBP/USD got close to dropping below 1.30 for the first time in two weeks as Bank of England Governor Mark Carney gave a dovish assessment of the UK economy. Talking at the Future of Inflation Targeting Conference in London Carney hinted that the bank was considering rate cuts/more QE, or both, should the UK economy not improve in the short to medium term. The UK economy was seen to be treading water Oct/Nov so Monday's next monthly reading for Nov/Dec will draw extra attention with a miss likely to increase the chances of a rate cut from the bank this year.

GBP/USD was already reeling from downbeat comments from new EU Commission President, Ursula von der Leyen, the day before where she pretty much wrote off the chances of getting a trade deal done by the end of the year and the pound was dragged even lower by the Governor's downbeat tone. GBP/USD dropped close to 1.3010 before finding support to recover modestly.

The UK's withdrawal bill from the EU was passed by MPs yesterday and should be rubber stamped in the next couple of weeks meaning the UK finally leaves the EU on the 31st Jan. As mentioned before attention will now turn to the trade talks between the two sides with the 11 month deadline looking optimistic to say the least. At best it looks like we will get a multi-phased trade arrangement with the most pressing matters sorted by December 31st. At worst we are looking at another cliff edge scenario where the threat of a default to WTO terms looms over the pound driving it lower the further we head into 2020. GBP/USD is around 1.3050 with GBP/EUR at 1.1760.

Key Movers

After a turbulent week some sort of calm seems to have returned to the markets as concerns over US/Iran start to fade. Equity markets have pushed higher and USD/JPY is up to 109.50 as risk appetite returns. Today's main area of focus will be the monthly US Jobs Report from the States. The headline grabbing Non-Farm Payrolls figure is predicted to hit 162k a reduction from last months stellar 266k. Wages are predicted to tick up 0.3% m/m and the rate of unemployment is expected to hold steady at 3.5%. Expect some volatility around 1:30pm today when the data is published.

Next week's main area of focus should be phase one of a US/China trade deal being signed on Jan 15th. Chinese officials are expected in Washington to hopefully start the process of bringing to an end the trade war that has been dragging on for nearly two years now. Don't expect hostilities to end with this first phase however, subsequent sign offs are expected to drag on long into 2020 and beyond as US President Donald Trump uses the offensive as a campaign tool for re-election in November.

Away from the States, Australia posted positive retail sales for November showing a 0.9% uplift month on month. Also at lunchtime we have Canadian job figures so some wild swings in USD/CAD could be on the cards. EUR/USD is back under 1.11 possibly showing markets expect a strong reading from the US jobs report.

Expected Ranges

GBP/USD: 1.2970 - 1.3120 ▼

GBP/EUR: 1.1675 - 1.1810 ▼

GBP/AUD: 1.8920 - 1.9080 ▼

GBP/NZD: 1.9650 - 1.9810 ▼

GBP/CAD: 1.6990 - 1.7150 ▼