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Sterling slips to 11 month low on Fox comments.

By Jake Trask

Sterling had a bad start to the week yesterday as Brexit concerns weighed over the pound throughout the European and US sessions. As covered yesterday, comments by international trade secretary, Liam Fox in a Sunday Times interview, that the chances of a no deal scenario with the EU were around “60-40” has seen sterling sold off throughout early trade and the sell-off continued with GBP/USD touching an 11 month low of 1.2920 at lunchtime. There has been a small rally this morning with cable pushing back up to around 1.2970 at present ahead of another day light on data. With little of note until Friday's GDP number, Brexit sentiment will likely dictate sterling’s direction until then.

The greenback had a strong start to the week with EUR/USD dropping below 1.1550 for the first time since late June. The dollar benefitted from ongoing concerns re: trade tensions throughout the day however after a sell off through the Asian session, equity markets pared their losses and most bourses are trading in the green this morning. The big geopolitical event yesterday was the re-introduction of US sanctions against Iran which came into effect overnight. The sanctions include the Iranian government’s purchase of US bank notes and dollar related transactions as well as targeting the purchases of precious metals and commercial planes amongst other measures to target Iranian industry. Further sanctions targeting Iran’s oil sector are due to come into effect in November. We are likely to see a deterioration of relations akin to the tit for tat insults that US President, Donald Trump and North Korean Leader, Kim Jong-un traded throughout last year. However Trump has stated he would be willing to meet with the Iranian leader, Hassan Rounhani for face to face discussions. Many will be hoping a Trump/Kim Singapore-style summit will resolve matters at some point in the future however this seems lightyears off at present.

The euro has recouped some of its losses encountered yesterday as a broad based dollar sell off benefitted the shared currency. With holiday season in full swing and many European countries enduring the hottest temperatures in decades its likely to be a quiet month in the Eurozone with little top tier data due throughout the month and no ECB interest rate decision due until September 13th. GBP/EUR trades at 1.12.

The Reserve Bank of Australia left rates unchanged overnight as was widely expect by the markets. The accompanying statement was perceived to be a touch dovish however the Aussie was relatively unmoved. It’s likely to be deep into 2019 before we see any action from the RBA as trade tensions continue and inflation remains under target. AUD/USD is at .7425 with GBP/AUD at 1.7450.

Little news emanated from Canada yesterday as most locals enjoyed a long weekend for the Civic Bank Holiday. Like most other currencies the loonie lost ground throughout yesterday before paring its losses overnight. The aforementioned US sanctions due for November targeting Iranian oil sales is likely to act as a support for Brent prices which should in theory support CAD as we near Christmas however overall risk aversion may nullify these gains. We will find out later in the year. Friday’s employment numbers are the only major event on this week’s schedule from Statistics Canada. GBP/CAD trades at 1.6810.

It’s a busy 48 hours from New Zealand with quarterly inflation expectations due tonight before tomorrow night’s interest rate decision from the RBNZ. A hold at 1.75% is all but guaranteed from Governor, Adrian Orr so as usual the statement/press conference will be the key areas of interest. GBP/NZD is at 1.92.