GBP losing streak against USD

September 9th: Highlights

• Sterling bounces back after last week’s losses
• EUR struggles to gain
• Asian governments take action
• USD broadly weaker
• Increased risk appetite across market

Sterling Comment

Despite the Pound completing its longest losing streak last week against the USD, it has managed to erase all losses, and has bounced back against a basket of currencies. Sterling has strengthened for another day in a row, helped by M&A news confirming Japanese Insurer, Mitsui Sumitomo Insurance, will be buying Britain’s Amlin Plc.

Today, we see manufacturing and industrial production data released, as well as the UK trade balance. Stronger data released today will increase expectations going into tomorrow, where we will see the more important release of the MPC announcement. Policy is expected to remain unchanged, but there is suggestion that a slight bias towards monetary tightening may be seen.

Global Comment

Despite German imports and exports reaching record levels, and upward revisions to the EU growth figures (rising from 0.4% to 0.3%), the EUR has struggled for gains. There is no data expected from the Eurozone today, leaving the EUR vulnerable to direction from the wider market.

Although uncertainty surrounding China’s economic growth remain, Asian markets have been stronger across the board, after the S&P 500 closed up 2.5%, and major governments in Asia were seen to take action. The Japanese Prime Minister pledged to drop corporate tax rates, and the Chinese Government showed that they’re ready to use fiscal policy.

Market uncertainty over US Fed policy action remains, as investors lose confidence in a rate hike in September. However, US JOLTS job openings data is scheduled to be released today, with improvement expected from 5.25m to 5.29m. Stronger data could provide support to the USD, which is broadly weaker due to rising European stock markets. However the commodity currencies, especially AUD and NZD, are gaining due to actions across Asia.

The Reserve Bank of New Zealand is expected to slash rates tonight from 3% to 2.75% tonight, whereas The Bank of Canada, is not expected to move rates from 0.5%.

Have a great day!