Home Daily Commentaries Pound well bid in advance of May’s cabinet meeting and US midterm results

Pound well bid in advance of May’s cabinet meeting and US midterm results

Daily Currency Update

The pound’s upward trajectory was checked by the release of weaker than expected UK Services PMI data yesterday, which printed at 52.2 vs. 53.4, evidencing that business activity in the country’s dominant services sector has slowed to a seven-month low. Cable slipped back below 1.30 on the news. Also, some reports and suggestions that any potential US/China trade deal was mostly a lot of hot air, also weighed on risk appetite and was a contributing factor for the mild sell-off in the GBP/USD pair.

However, there was some good demand under the big 1.30 figure and come the late afternoon session, GBP/USD had forced its way through the 100 day moving average at 1.3035, supported by an underlying positive feeling amongst investors that a Brexit deal was close.

This positivity has intensified this morning, ahead of Theresa May’s Cabinet meeting today. There are some reports suggesting that she will give ministers an ultimatum to back a draft deal, which includes agreement on a the Irish border issue. GBP/USD is now trading at its highest level since 22nd October, flirting with a break of 1.31 ahead of the meeting, and we will no doubt see some further volatility today as the rumours and headlines gain momentum ahead of/and post cabinet meeting.

Key Movers

The greenback drifted lower against all of the major pairs overnight with investors anxious before the U.S. midterm congressional elections. The Democrats are favoured to wrest control of the U.S. House of Representatives on Tuesday, and Republicans are expected to retain their majority in the Senate. Market analysts warned that an unexpected outcome could trigger a massive unwind of long dollar positions and undermine the greenback.

On the data front yesterday US October Markit Services PMI came in at 54.8, better than the initial estimate and above the previous 53.5. ISM non-manufacturing PMI for the same month printed at 60.3 beating expectations of 59.3 and retreating from the record high of 61.6 achieved September.


The euro edged back above 1.14 through trade on Monday as investors checked recent US gains ahead of today’s congressional midterms. Having met sustained pressure through the last three weeks the 19-nation combined unit enjoyed some respite as investors’ focus turns to what could be the most important midterm election in 50 years.


The single currency has struggled to shed a bearish bias through the last 7 months with ongoing political uncertainty, global growth concerns and Italian fiscal uncertainty continuing to weigh on the markets’ appetite for change. While there is suggestion that the ECB may hike rates at some point soon, the burgeoning divergence in central bank monetary policy continues to cast a spectre over EUR/USD and any potential for a move back through 1.15.


The Australian dollar has pushed back through the .72 figure overnight, supported by an improvement in risk appetite and a slightly more upbeat RBA. In their monetary policy statement overnight – and as expected - the central bank announced it would be leaving interest rates on hold at 1.5%, but indicated it was happier with the performance of the labour market and GDP growth.

While there’s little to look forward to in terms of upcoming domestic data, AUD traders will be looking closely to the results of the US midterms.


The Canadian dollar is weaker against the USD this morning as investors pare back expectations for a Bank of Canada interest rate hike next month.

On the local data front there are no scheduled releases today, so focus will be on the other side of the border, on the results of the US midterm elections.

From a technical perspective, we continue to expect support to hold on moves approaching 1.2970 while any upward push will likely meet resistance around 1.3200.


NZD/USD gathered momentum on Monday and overnight. Having opened the start of week at 0.6645, the pair edged higher towards 0.6675 as the US Dollar came under pressure on the back of weaker US treasury yields. It has tracked AUD/USD higher, too. There is no local data due but with the US mid-term congressional elections approaching it could still be a volatile next 24 hours for NZD/USD.

Expected Ranges

  • GBP/USD: 1.2900 - 1.3250 ▼
  • GBP/EUR: 1.1390 - 1.1500 ▼
  • GBP/AUD: 1.7950 - 1.8150 ▼
  • GBP/CAD: 1.7050 - 1.7270 ▼
  • GBP/NZD: 1.9460 - 1.9700 ▼