GBP: Sterling not up to much
EUR: Another test of EUR strength
USD: Should resume weakness soon
Sterling markets are quiet this morning with a pop higher against the USD the only real movement of note in the past 24hrs. The most important piece of sterling data this week will likely be the speeches by Bank of England members Haldane and Bailey on Wednesday and Friday respectively and Brexit talks that have begun again in Brussels.
We expect sterling to remain rangebound this week.
European assets also drove higher yesterday, and the euro has remained strong despite last week’s turn lower in sentiment in local manufacturing and services sectors. Another test will come from Germany’s IFO index this morning with risks very much to the downside although we would not be surprised if investors once again remain sanguine given the wall of stimulus provided by central banks and governments around the world.
Another run higher in global equity markets has been enough to push the USD lower in the past 24hrs although these losses are hardly ground-breaking and G10 pairs are not breaking into new ranges currently.
The fact that the rally was propelled by gains for the technology company Apple and a few other large tech stocks makes us doubt the viability of further gains in equities absent a pick-up in economic data.
News that both the US and China remain committed to the Phase 1 trade deal struck between the two countries last yearn will have helped sentiment as well and alongside recent positive virus vaccine news, leaves little reason to be fighting against these gains in risk.
We expect the USD to remain on the back foot into the key meeting of global central bankers beginning on Thursday in Jackson Hole, Wyoming with further losses possible into the long weekend.
We will be watching oil prices closely in the coming sessions ahead of a terrible spate of weather due to hit the Gulf of Mexico and the bulk of US oil operations in the coming days. For the first time ever, two hurricane strength storms are due to hit the area at the same time and the inevitable disruption could be enough to push oil higher in the coming sessions, benefiting currencies such as the CAD, NOK, RUB and IDR.
Have a great day.