Daily Brief

Daily Brief

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Tit-for-tat

People v Parliament 

Persistent no-deal Brexit rumblings and speculation that PM Boris Johnson is planning for a general election have sent sterling into a struggle in recent days. His team are rumoured to be preparing for a “people versus parliament” general election campaign, after announcing an injection of £1.8bn boost to the NHS. The Times is reporting the motive behind the spending is to stop Remain-supporting politicians from toppling his government and small Commons majority, after losing the Brecon and Radnorshire by-election to the Lib Dems earlier last week. Johnson now has just a working majority of one in Parliament. 

Today’s release of the UK services PMI could provide some trading opportunities, demonstrating what the wider market sentiment is surrounding the Pound. Further ahead into the week and a key day for trading could be Friday, with plentiful data releases including GDP and manufacturing production. 

The stalemate continues 

Trade war tit-for-tat once more, with China retaliating against the US by devaluing its currency and stopping the purchase of US farming goods. US stock markets fell in response after President Trump imposed the new tariffs on $300bn of Chinese imports. With no end in sight to the stalemate, what could be the next step for these two superpowers? Earlier in the year China hinted that it could restrict exports of rare earth minerals, vital the US car manufacturing. 

Non-farm payroll data released on Friday was also notable for USD. Adding 164,000 new workers, the data came in bang on the mark with predictions and better than previous, more volatile, months. Unemployment was also stable, backing up the Fed’s Chairman Powell statement on Wednesday; “The outlook for the US economy remains favourable.” ISM non-manufacturing PMI data released later in the day could contribute towards a little pick-up, if as Powell likes to say, it is favourable. 

PMI’s aplenty 

The Euro fell to a two-year low against the US Dollar after the Fed stated it would not cut interest rates as much as markets thought. President Trump blasted the Fed in response, with Wall Street now expecting a further cut come early autumn. Back to Euroland and the ECB is widely predicted to cut interest rates of its own at the same time and restart quantitative easing. With ECB President Draghi stating last week that the outlook is “getting worse and worse”, the outlook for the Euro isn’t looking rosy. 

It’s a busy day ahead with plenty of PMI data from Europe, with Spain, Italy, France and Germany all reporting. Germany’s private sector hit its weakest level in more than six years last month, suggesting that Europe’s growth, and the EU’s largest economy, is weakening. Germany is one to watch tomorrow too, with industrial orders forecast to show a recovery. Anything better than expected will be a welcome relief to the EU and ECB. 

Coming up steady has been the Canadian Dollar, resilient compared to Norwegian Krone and Australian Dollar against USD. Bond yields have pushed the Loonie’s outlook upwards, but the US-China trade conflict could threaten its growth, just like the Aussie. Employment data later this week could be telling for CAD, as could a whole host of data releases for New Zealand, already heavily impacted by the trade war. The RBNZ monetary policy statement comes late tomorrow, as well as its official cash rate. A heavy week for heavily watched data releases then.

GBP: Rumours of a snap general election

GBP: Rumours of a snap general election

USD: Favourable data vs trade war stalemate

USD: Favourable data vs trade war stalemate

EUR: PMI data not pretty

EUR: PMI data not pretty

NZD: One to watch

NZD: One to watch

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