Tuesday saw sterling on the back foot again
2 October, 2019
Tuesday saw sterling on the back foot again, falling nearly a cent against the euro and similar against the US dollar, carrying on from the losses made over the last week.
These losses have of course been down to Brexit talks, as some reports have circulated that the EU are not willing to talk or even consider a time limit to the Irish backstop. With the deadline approaching fast, this has seen sterling sold off being the main sticking point for an amicable divorce at the end of the month. If no deal is reached surrounding the backstop or no extension to the deadline is agreed upon, Britain crash out of the EU, with no deal in 29 days.
Boris Johnson had reportedly suggested replacing the backstop with a “customs clearance area” on both sides of the border, but with the Irish deputy PM dismissing it as a non starter in a Tweet, markets were back selling the pound.
It was only late in the day yesterday, after European close, that we actually saw a rally by the pound, helped against the dollar by US manufacturing figures which showed further contraction in the sector, posting 47.8, down from 49.1 from last month, a stark contrast to the expected growth figure of 50.1.
Furthermore, comments from BoJo stating the government is willing to be flexible to solve the backstop issue, coupled with a Bloomberg report suggesting the EU was considering an option to include a time limit in order to secure a deal saw sterling rise across the board.
Will this carry on Wednesday or will the Bloomberg report be contradicted and the gains reversed?
In addition to the current market sentiment, we see UK Markit construction PMI released at 9.30am and US employment change at lunchtime, followed by a speech from Fed member Williams at 3.50pm.
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