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Money, Money, Money

May’s moves pause a volatile pound 

The pound danced it’s way to a 10-day high versus the euro off the back of PM Theresa May’s moves at the Conservative Party Conference. This is despite no real new rhetoric from the PM, but markets were looking for a simple, uneventful address after May’s previous two speeches saw the sterling stumble. 

Ireland’s support for her Custom’s Plan also helped pop the pound back up to the top, with this intervention seen as a serious sign of support ahead of the crucial EU Summit on October 18th. 

With a data light calendar today, political sentiment could well be the order of the day when it comes to market movers.

Strength in the US economy

The dollar remains king this morning as any inkling of a bounce in the pound fell back to a September low after 10 year US yields rose to the highest point in seven years, with 30-year Treasury bond reaching its highest level since October 2014. Federal Reserve Chairman Jerome Powell said that he could see the Fed raising interest rates beyond that of the ‘neutral’ level. The 10-year rate is of significant interest given that it sets the rates for many everyday Americans looking for business and consumer loans, crucially home mortgages. 

Coupled with strong ADP data, the markets moved heavily into the Greenback, with GBP/USD moving back below the 1.3000 level.

Today’s data comes from the Labor Department with its monthly update on employment.

Italy backs down on budget row 

A key story that has been developing is the issues arising in Italy and more specifically their budgetary woes that weighed heavily on the common currency. Despite concerns of a delayed budget meeting, the government did their best to quash these fears by confirming there would be no delays or departures, with Economy Minister Giovanni Tria announcing plans to cut the budget deficit earlier than previously stated, in 2020.

This suggests that Italy’s government is moving away from its initial 2.4% deficit per year from 2019 to 2021 after EU pressures. With a national debt of €2 trillion, a fight with Brussels could concern markets and investors. But with anti-establishment Five Star Movement and right-wing Northern League winning Italy’s recent election with a promise of pushing back on EU rules, eurosceptics in the country may see Tria’s concession as unsavoury.  

The market clearly took it well never-the-less as the Italian-German bond spread tightened considerably.

Multiyear yield highs and strong economic data boost USD

Multiyear yield highs and strong economic data boost USD

Market responds well to Italy’s budget concessions to EU

Market responds well to Italy’s budget concessions to EU

20-day high for the pound v euro off back of May’s address and Ireland’s support of her Custom’s Plan

20-day high for the pound v euro off back of May’s address and Ireland’s support of her Custom’s Plan

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