Currency Note

Exactly one year ago Britain voted Brexit

By Christopher Nye June 23rd, 2017

no special deal

In what has been a pretty wild week for sterling fluctuations, it was a relatively quiet day all told. There was some good news from the UK, as the factory report showed that UK factory orders hit a 29-year high.

Some immediately speculated that this could reinforce calls for a UK interest rate hike, but it’s worth noting that manufacturing only accounts for about 10% of the economy.

Elsewhere, European Council President Donald Tusk hinted that no Brexit was still an option if the UK wanted that. In a nod to John Lennon, he said “You may say I’m a dreamer but I’m not the only one.”

GBP: quiet day for the pound is the calm after the recent storm

Sterling traded in a very tight range as the calendar was pretty lacklustre. In truth, so much has happened during the past few weeks, it was probably time for the pound to take a breather.

The only point of note was that Theresa May attended the EU summit with Brexit one of the topics of discussion. However, because of the recent events at home and in Europe, security was a far bigger topic.

Following contradictory views from the Bank of England Governor and its Chief Economist regarding UK interest rates, the markets will be keeping a close eye on the Monetary Policy Committee speakers and what they have to say. Overnight, MPC member Forbes was speaking, but her views are known to the market as she voted for a hike last time around. The impact was limited because she’s due to leave the MPC at the end of the month.

The docket is light today, but any Brexit news or developments could move the currency.

EUR: EU activity data to hit wires

It was tight trading ranges all round, with the world’s most liquid currency pair operating within a 30-tick range. The two-day EU Leaders’ Summit kicked off yesterday, which will be attended by European leaders including Theresa May and newly elected French President Emmanuel Macron.

Looking ahead to the final trading session of the week, we have some key activity data for the region in the form of the PMIs for the manufacturing and service sectors.

USD: euro and dollar pairing consolidate losses

It has been a year since the UK Brexit referendum which left shockwaves across the globe. Today, the UK government is governing with a minority government and because of this, the GBP and USD pairing has been fluctuating pretty wildly over the past 365 days.

Despite positive unemployment claims from the US and the uncertainty around Brexit, the pair held strong and traded within a range bound above 1.2610 for the most part of today.

In other news, the EUR and USD pairing broke below 1.1150, hitting a fresh daily low. The pair are now hovering below 1.1150, consolidating losses.

It’s going to be a relatively quiet day for data releases from the US, and it is likely most investors will be keen to see if the GBP and USD pairing remains above 1.2600 after a sell-off Friday.

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