In contrast to recent sessions, Sterling was not the focus of attention on Thursday as the ECB policy decision dominated markets while there was also a slight lull in domestic political activity.
EU officials were very cautious in their assessment and claimed that no workable proposals had been received from the UK government. Speaker Bercow warned that there would be more aggressive action if the government attempts to by-pass the law ruling out an October ‘no-deal’ Brexit. A firmer tone surrounding global risk appetite provided an element of UK currency support during the day. Sterling dipped below 1.2300 following the ECB policy meeting before recovering to near 1.2350 while the Euro strengthened to the 0.8965 area.
Reports of a potential breakthrough on Northern Ireland regulation were somewhat downplayed by DUP leader Foster. Talks, however are continuing with Boris Johnson looking for a lifeline. As of writing, Sterling is currently trading at 1.24 against the dollar.
Core CPI in the US rose 0.3% in August, beating market estimates. The index now stands at 2.4% over the past 12 months (the largest increase since July 2018), quashing any hope of a further rate cut from the US Fed next week. The market remains volatile as participants continue to digest the incoming news.
President Trump delayed new tariffs on Chinese products, providing hope that there is progress in the US-China trade negotiations.
The upbeat mood around Euro remains high this week and is now lifting the currency to fresh multi-day highs against the Dollar to 1.11.
After testing the lows near 1.0925 yesterday, The Euro managed to spike back up and retake the key 1.1100 figure, as market participants continue to adjust to the recently announced ECB stimulus package. In fact, following quite a volatile session on Thursday, the Euro surprised markets after quickly reversing the post ECB knee-jerk dip and positioned itself back to the upside. It is worth recalling that much of the ECB’s easing was already priced in, and the size of the QE at €20 billion per month was somewhat disappointing.
Data to watch
13.30 USD - Core Retail Sales
13.30 USD - Retail Sales
15.00 USD - Prelim UoM Consumer Sentiment
Posted in Daily Market News on Sep 13 2019