Daily Brief

Daily Brief

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Market awaits ECB decision

Pound makes gains on GDP growth

Sterling rose against the US dollar and the euro yesterday for the highest value in a month after a report from the Office of National Statistics (ONS) showed that GDP had grown by 0.3% in July. Overall, growth for the three months up to July was flat but the numbers came after last month’s numbers from the ONS saw numbers shrinking by -0.2% due to Brexit concerns. The passing of legislation blocking a no-deal Brexit, together with positive numbers on GDP gave the pound a boost.

The numbers also helped to diminish fears that a recession may be on the horizon for the UK. However, the picture wasn’t entirely rosy; GDP growth stemmed from a growth in the UK services industry but both construction and manufacturing contracted in the same period. Sterling may have further challenges ahead including the progress of Brexit negotiations while parliament has been suspended and the outcome of future GDP reports. Positive numbers could further ease fears of a recession, but if July was a blip amidst flat growth, there may be further challenges ahead.

All eyes on the ECB and Germany

The euro made gains on Monday despite the market appearing to be holding its breath for the European Central Bank (ECB) policy decision on Thursday. The reason was a report that Germany may boost fiscal stimulus; the “shadow budget” would be a departure from the government which would aim to boost public investment at a level that would reach beyond the strict national debt rules. As a result, the EUR made gains to reached 1.1051 against USD, up 0.22% on the day. There appeared to be a limit to the euro’s gains, however, as the market awaits the ECB’s announcement of any plans for fiscal stimulus on Thursday.

The US dollar had nothing in response to the euro; the dollar index which measures the US dollar against six major currencies found an overall decrease of 0.13%. Positive sentiment elsewhere appears to have been the reason for the decline.

Possible breakthrough in US-China trade war helps AUD make gains

The Australian dollar had a good day on Monday. While new trade tariffs were imposed by the US on China on Monday, and retaliation followed swiftly, hopes of an end to the current impasse with a new round of scheduled talks proved good news for the Aussie. It is thought that the talks may put an end to the levies due to take effect on 15th December. Improved trade could give the weakened Australian economy a boost and may mean that the Reserve Bank of Australia will change its approach, having already cut rates twice this year, taking it to a fresh low of 1%

Oil prices and investor confidence help the Loonie

A 2% rebound in oil prices proved to be good news for the Canadian dollar, particularly following hot on the heels of last week’s report showing an increase of 81,000 jobs. Oil prices climbed on Monday after the new Saudi energy minister, Prince Abdulaziz bin Salman, confirmed he would limit crude output to support prices. 

The recent report of 3.7% GDP growth in the second quarter is also assisting the Loonie, given the global backdrop which has seen a slowing of the economy. Since the beginning of 2019, the Loonie has gained 3.7%, making it the top-performing G10 currency and apparently weathering the geopolitical storm currently impacting other countries.

GBP: Gains made as recession fears ease

GBP: Gains made as recession fears ease

EUR: Germany helps euro with reports of shadow budget

EUR: Germany helps euro with reports of shadow budget

AUD: Progress on trade war talks boosts Aussie

AUD: Progress on trade war talks boosts Aussie

CAD: Loonie reaches highest level in six weeks against USD

CAD: Loonie reaches highest level in six weeks against USD

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