Bond market weighs on Sterling
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Daily Currency Update
Sterling remains under pressure due to the bond market. Long-dated bonds bore the brunt of selling early in London yesterday, with yields on the 30-year treasury were up 0.03 percentage point at 5 per cent. Investors are worried about the health of government finances globally with major economies facing the twin challenge of managing large debts and trying to boost growth without sparking inflation. GBP/USD saw a session low of 1.3340 yesterday and GBP/EUR has dropped to 1.1480. EUR/USD dipped to 1.1620.Macroeconomic data has so far taken a back seat to the bond market, but we saw US ISM manufacturing PMI come in short of forecast with 48.7. This meant that manufacturing contracted for a sixth straight month in August as factories continue to grapple with the impact of import tariffs. Trump offered some sound bites of note during his White House speech last night. In short, he will go to the supreme court to challenge the recent ‘illegal’ tariff decision and he reiterated the need to lower interest rates.
Key Movers
In Japan, the Yen fell overnight after the Japanese ruling party’s Secretary-General Hiroshi Moriyama said he intended to resign from his post. This could potentially affect the fate of Prime Minister Ishiba, who has resisted calls to quit over an election loss. The political uncertainty has and will weigh on the Yen until there is a resolve. This may also offer guidance on why the USD has taken a lot of gains since the bond market sell off, with investors steering away from the JPY as an option.Expected Ranges
- GBP/USD: 1.3340 - 1.3490 ▲
- GBP/EUR: 1.1480 - 1.1560 ▲
- GBP/AUD: 2.0450 - 2.0670 ▼
- EUR/USD: 1.1580 - 1.1710 ▼