30/09 – Markets ignore old men shouting at each other

GBP: Pound back to watching the Houses of Parliament

EUR: Staying away from politics

USD: What a mess

Sterling

For once the pound is not the currency affected by the craziest set of politics although Brexit is back on the market’s radar this afternoon. The government’s Internal Market Bill is up for debate in the House of Lords and the chance of the legislation being ping-ponged between both Houses of the UK parliament and the legislation not being law by the government’s own October 15th deadline are high.

An outright rejection of a bill by the House of Lords is rare but PM Johnson does not have a majority there and so pushing through a deal that breaks international law through a chamber stuffed with the old school was always going to be difficult.

Such an outcome would likely be sterling positive however, so we will be monitoring headlines closely through the session.

This morning’s GDP figures confirmed that growth in the 2nd quarter of the year collapsed by 19.8%. The initial reading of Q3 data is due at the end of October.

Euro

Euro rebounded strongly against sterling yesterday, cancelling out the pairs push above the 1.10 level as quickly as it began. This comes despite infighting between European nations once again over the region’s budget.

In the short term, we expect the single currency to largely trade on global risk appetite

US Dollar

What a mess. I am not sure if I will ever get the back the 2hrs I spent on my sofa in the early hours of this morning in front of one of the most embarrassing political episodes I’ve ever seen. The Trump game plan was clear from the outset; interrupt Biden’s flow and train of thought and attack, attack, attack. I am not sure anyone who tuned in to decide between the candidate’s opposing views on the issues of the day will have learned much.

Trump’s base will have enjoyed the spectacle but I have to doubt whether suburban housewives – a key demographic that the Trump campaign need to hold on to from their 2016 election – will have enjoyed the sight of 3 grown men shouting at each other for 90 minutes.

The dollar is a little stronger this morning as equities got the willies from Trump’s unwillingness to see a loss as anything other than fraud and a stolen election, increasing the chances of a contested outcome.

The next five weeks are going to be unbearable, but markets remain ready and willing to use the dollar as a barometer for their fears.

Through the rest of the day we expect the dollar to strengthen on end of month/quarter flows.

Elsewhere

Russian ruble continues to slip lower as heightened fears over fresh rounds of sanctions on the country make their mark. Local reports suggest that Russian citizens are struggling to exchange currency for dollars and rubles at retail sites showing that the collapse in the RUB – currently close to the four year low it hit in March is unnerving the man on the street.

Have a great day.

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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.