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Pound drops as Trump wades into Brexit debate.

By Jake Trask

GBP/USD is back under 1.32 this morning as Donald Trump weighed into the Brexit debate adding downward pressure to an already fragile pound. In an interview with The Sun newspaper, Donald Trump undermined UK Prime Minister, Theresa May's Brexit plan by saying “If they do a deal like that, we would be dealing with the European Union instead of dealing with the U.K., so it will probably kill the deal.” He also commented that ex-Foreign Secretary, Boris Johnson, who resigned over the proposed plan would make a “great prime minister.” The comments from the leader of a country many consider to be our closest ally will add to the argument of those who consider Theresa May a lame-duck PM with change at the top needed. Trumps comments have obviously rattled holder of the pound and it is lower across the board.

US CPI numbers came in a touch soft yesterday with the monthly core reading hitting target of 0.2% however the overall reading fell short slightly at 0.1%. EUR/USD briefly moved higher on the news pushing back up from 1.1650 towards 1.17 throughout the afternoon however dollar strength has come back to the fore since and we are back down to 1.1670. Another indication of the dollars strong recent performance is USD/JPY which continues to move higher, currently sitting around 112.70. Fed Chairman, Jerome Powell yesterday commented that the US economy is in a “good place” but the escalation of tariffs could pose a threat to future performance.

There was little new information to take from the latest ECB Monetary Policy Meeting Accounts which were released yesterday lunchtime. Traders are trying to get a firmer idea of when the ECB may raise rates from their negative level and the publication just re-iterated that they will remain on hold “through the summer of 2019.” It’s a quiet end to the week so Trump/trade will be the main driver of markets. The negative comments from Trump mean GBP/EUR is back below 1.13.

AUD/USD is back under .74 as broad dollar strength permeates the markets at the end of the week. It’s a quiet start to next week from Down Under with Wednesday nights employment figures the only top-tier release due in the near-term. GBP/AUD trades at 1.7775.

USD/CAD is making another play for 1.32 after dipping back under the big number yesterday. The lack of a hawkish outlook from the Bank of Canada as it raised rates on Wednesday meant that the loonie held relatively steady. Trade concerns with America were mentioned of being of concern for the BoC chief Stephen Poloz. GBP/CAD is at 1.7305.

Overnight saw the Business NZ Manufacturing Index drop to 52.8 from 54.4 adding downward pressure to an already fragile Kiwi. There is no high level data next week at all from NZ so Trump/trade will dictate the local dollars direction. GBP/NZD is at 1.9475.