Daily Currency Update

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Sterling slips on MiFID 2 rumours

GBP - British Pound

It was a bad day for the pound yesterday as GBP/USD plunged around one cent on the back of rumours that the EU may look to re-write its recently introduced rules around financial trading within the bloc known as MiFID 2. When introduced the rules gave certain concessions to London given its status as a global financial hub. Yesterday there were reports that the EU may look to renege on this as the UK and EU go their separate ways after Brexit. Without going into the minutiae of the detail, this could be bad for the City as the EU looks to draw jobs in financial services to Paris, Frankfurt etc. GBP/USD fell below 1.30 to bottom out at around 1.2960 on the reports and it is struggling to recover. Currently trading around 1.2970.

The day had started so much better for the pound as it was pushed higher by a better than expected Final Services PMI which printed 53.9, its best level since September 2018. The report showed the UK appeared to have recovered from the pre-election uncertainty that had seen the UK economy grind to a halt however, as is so often the case, Brexit uncertainty undid those gains. GBP/EUR trades around 1.18.

Key Movers

As expected yesterday evening, US president, Donald Trump was cleared of impeachment at an historic trial held at the US senate, only the third time in history this has occurred. With Republicans already holding a majority in the senate, it would have been close to a miracle to see the required two-third majority achieved to throw out Trump who had been accused of abusing his power in delaying aid to Ukraine in exchange for requesting the country dig for dirt around the campaign of Democrat Presidential nominee, Joe Biden. There was one dissenter from the "Grand old Party" however as former Presidential nominee, Mitt Romney broke ranks and voted with the Democrats in calling for the president to be sacked. In the end Trump was backed 53/47 and 52/48 over the two charges with Trump now likely to use the acquittal as ammo for his re-election campaign throughout the year.

Away from Washington, the Coronavirus outbreak continues to dominate world news as persons confirmed as infected approaches 30k, with over 500 people now known to have died from the outbreak. Some respite has been seen with reports that a breakthrough in treating the illness may have been achieved however the situation is sure to get worse before it gets better weighing on risk assets around the world. The Aussie and Kiwi continue to trade lower given their close trading links to China and USD/JPY struggling to get above 110 despite some upbeat Non-Services PMI and ADP employment data from the States yesterday. The virus will continue to dominate news before the financial market's eye will be briefly drawn away by Friday's monthly Jobs Report from the US, with the closely followed Non-Farm Payrolls predicted to show 161k added to the workforce for January. EUR/USD continues to hover around 1.10

Expected Ranges

GBP/USD: 1.29 - 1.3060 ▼

GBP/EUR: 1.1720 - 1.1850 ▼

GBP/AUD: 1.9180 - 1.9320 ▼

GBP/NZD: 1.9950 - 2.0130 ▼

GBP/CAD: 1.7180 - 1.7310 ▼