Daily Currency Update

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Sterling higher ahead of Brexit Trade Talks

GBP - British Pound

Sterling spent much of last week on the backfoot but found some support through Friday's session as risk appetite improved and headline US Retail sales figures came in below expectations at 1.2% vs 2.1% predicted. Although numbers are for July, the focus will remain on the road ahead as the US’s failure to pass a new stimulus bill and continued Covid concerns could lead to a slower economy. The good news is stimulus remains strong and those that are in the stock market, continue to do well.

Looking ahead to this week, the UK and Europe start their 6th round of trade talks in Brussels from tomorrow, with the talks set to last until the end of the week. Ireland's new PM, Michael Martin, stated last week that a post-Brexit deal can be struck after talks with Boris Johnson on Thursday. He also went on to say failure to reach an agreement would harm economies across Europe and UK in the wake of the Coronavirus crisis. Hopefully these comments ring true and further positive rhetoric comes out of this week’s talks. If so, sterling could gain back more ground against the safe haven USD.

This week also sees the release of UK inflation numbers, due on Wednesday, with analysts predicting a fall to 0.5% from 0.6% previous. If CPI figures continue this trend or if the numbers come in even lower, it could force the Bank of England to change its monetary policy stance and lead to further GBP weakness in the coming weeks/months.

Key Movers

US-China trade tensions continue to grab headlines however a review of the trade pact, which was due to take place on Saturday, has been postponed indefinitely and the current deal will remain intact for the foreseeable future. This weekend, however, saw President Trump put a 90-day deadline on the sale of Chinese owned video sharing app ‘Tik Tok’, further stoking the fires between the two nations.

Concerns over a second wave of COVID-19 in Europe saw European equity markets retreat nearly 2% on Friday and lead to the UK introducing further quarantine measures on holiday makers returning from Europe.

All eyes will now be on European PMI and consumer confidence data, due on Friday, while the main news from the US comes in the form of Housing data due tomorrow, Wednesday FOMC minutes, and Thursdays’ jobless claims.

Expected Ranges

GBP/USD: 1.3025 - 1.3175 ▲

GBP/EUR: 1.10 - 1.1120 ▼

GBP/AUD: 1.8175 - 1.8325 ▲

GBP/NZD: 1.9975 - 2.0150 ▲

GBP/CAD: 1.7275 - 1.74 ▲