04/12 – GBPUSD hits 12 month high

GBP: Calling Macron’s bluff

EUR: Consolidating for now

USD: Stimulus efforts pick up but may be too little too late

Sterling

GBPUSD brushed up against its highest level since last year’s ‘Boris bounce’ yesterday as the combination of a weak dollar and a market prepared to call the French President Emmanuel Macron’s bluff on a Brexit deal veto pushed the market higher.

Brexit negotiations are the be all and end all for sterling at the moment; despite making good ground against the USD, the pound remains listless against the euro and other currencies that the market sees as not exhibiting quite as much political risk which, needless to say, is a fair few.

Headlines from Brussels will continue through today and the weekend as we get closer to the latest ‘soft’ deadline of when an agreement needs to be made between the two parties. That deadline seems to be the end of next week but if cooler heads do not prevail then this sterling strength will start to evaporate quickly.

Euro

Following a few days of strong gains for the single currency, yesterday saw a bit of consolidation. This is not a bad thing; if you are looking for the EUR to run higher from here then a pause before an assault at increased prices, is entirely appropriate.

As we have noted before, the euro is a currency that historically has seen policymakers intervene verbally to correct moves that they see as unwarranted. This typically happens during short, sharp periods of appreciation. The move in EUR since the beginning of October has been a lot slower than the move higher in July and so may be allowed a little more leash than before.

US dollar

We’ve had four days this week and the dollar has fallen on all four of them. Today looks likely to make a full house of dollar declines.

Yesterday’s jobless claims figures ostensibly looked OK but given the survey took place during the Thanksgiving week, the data is not as reliable as it would be normally. We foresee a larger pick-up in US unemployment before the end of the year and despite the greater focus that has been made to a new US stimulus effort, no jobs are going to be saved any time soon by actions in Washington.

Today’s payrolls announcement should confirm that wages remain low and job prospects are poor in the current United States. The jobs numbers are released at 13.30 GMT.

Elsewhere

Everywhere else, we are sat in a period of consolidation. Payroll figures from the US have the ability to turn a market back around and so we expect many are waiting for a green light to continue beating up on the USD into the weekend.

Have a great day and a better weekend.

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Jeremy Thomson-Cook

Jeremy Thomson-Cook

Jeremy has over 13 years experience working in the FX industry. As a specialist in political risk mitigation and currency hedging, he regularly advises clients on the day-to-day moves of the markets and the implications of fiscal and monetary policy on international businesses.