Porcupine Pound:
It was apparent as of market open this morning that the Pound had managed to secure a stronger footing. Stemming largely from a mild improvement in Brexit sentiment, the Pound soon recovered off of its 1.2701 lows against the US Dollar, even breaking through 1.13 against the Euro on two occasions this afternoon. Overnight reports that the vice President of the Commission had guaranteed European institutions access to UK clearing facilities supported the domestic currency and the Euro at market open. The subsequent news that saw the Pound appreciate by around 0.95%, released at 15:27 this afternoon, contained rumours that a post-secession trading deal with the European Union may come as soon as 21st November. The news, which stemmed from a letter written by UK Brexit Secretary, Dominic Raab, got markets momentarily hot under the collar. As the shock reaction slowed, traders’ cold feet returned with the Pound stabilising at a more modest 0.5% gain on the day, on a trade-weighted basis. With an interest rate decision tomorrow at the Bank of England, investors are keeping a wary eye on the words and actions of Governor Mark Carney. Following Chancellor Hammond’s budget speech on Monday afternoon and the promise of increased spending, there could be scope for the Bank to strike a more hawkish tone. However, given the uncertainty of Brexit, a November 2017 style reaction could ensue with investors rewarding the Pound with less value despite higher rewards for domestic investment due to the irresponsibility of the monetary authority in the face of Brexit. Month end balancing flows saw the US Dollar gain significant value with mid-term elections now only one week away. Today’s trading within the Dollar was anticipated to be choppy with necessary flows from passive funds across the globe creating additional and idiosyncratic demand for the greenback. The Rand suffered, getting dragged down by a weakening emerging market sell-off. Yesterday’s weaker Euro was also sustained throughout today’s session as Italian deputy Prime Minister Salvini announced Italy’s budget wasn’t going to budge! With the Commission refusing to accept Italy’s incumbent budget proposal, European risk sentiment continued to sour.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – French Parliament
Humphrey Percy
Mon 9 Sep 2024
French Parliament Some more examination of President Macron’s appointment of Michel Barnier as his Prime Minister reveals more about the calculation behind the decision. Nothing to do with MB being known for being dull, nor for organising the 1992 Winter Olympics in Albertville and not even for his more recent role as EU Brexit negotiator. […]
Daily Brief – Oil
Humphrey Percy
Fri 6 Sep 2024
Oil Why is oil at the year’s low? Look no further than the litany of reasons affecting the market as a whole. In no particular order: economic slowdown in China; vertiginous drop in Nvidia share price; disappointing economic releases in the USA particularly on Jobs and Manufacturing and last for good measure the expectation that […]
Daily Brief – Germany
Humphrey Percy
Wed 28 Aug 2024
Germany The post WW2 economic much lauded miracle that was Germany is at odds with 2024 Germany which managed a 0.2% increase in GDP in Q1 but fell by 0.1% in Q2. That means that in Q2 Germany has slid to the foot of the table with USA at the other end at +2.8% with […]
