Yesterday turned out to be the worst day in 2019 for the pound. Sterling lost 1.5% against the euro and 1.3% against the greenback. Across the globe it was the 2nd worst performing currency, only ahead of the Malagasy ariary!
The PM’s strategy of making no-deal a credible threat is certainly working with the currency markets. Yesterday was absolute proof. The weekend rhetoric from a number of cabinet members had markets in panic mode, as a result, sterling was sent to the slaughter house. While Johnson’s strategy appears to be working its way into financial markets, for it to be successful, it must produce a positive response from the European Union. For the moment, the EU are happy to sit on the side-lines. With Parliament now in recess until the beginning of September, this could turn out to be an extremely painful Summer for sterling.
The selling has continued overnight with sterling down to new lows against the $ and €. Both pairs currently trade down 0.7% from last night’s New York close at 10pm UK time. No doubt, another testing day awaits. This is all ahead of Thursday’s Bank of England announcement and quarterly inflation report. Mark Carney and co. will have their first opportunity to respond to the new prime minister’s Brexit strategy in relation to growth and inflation expectations.
Overnight the Bank of Japan left policy unchanged. The Japanese yen found buyers as the central bank lowered its forecasts for global growth. Today’s calendar is light, many will be preparing for tomorrow’s Fed announcement where they are widely expected to lower interest rates for the first time in over a decade.
Written by Viv Savani. 8:34am, July 30th 2019
The details expressed in this market report are for information purposes only and are not intended as a solicitation for funds or a recommendation to trade. Cornhill International Payments limited accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the above information.