Yesterday saw sterling edge up against most major pairings

18 September, 2019

Simon Eastman

Yesterday saw sterling edge up against most major pairings in the afternoon as the recent negative sentiment towards UK financials appeared to ease.

This coincided with the start of the hearing at the supreme court, which is hearing the appeal brought against the ruling Boris Johnson acted unlawfully by proroguing parliament, lying to the Queen, in an attempt to help push through leaving the EU on 31st October without a deal. Also in the afternoon, we saw Jo Swinson give a speech at the Liberal Democrats annual conference in Bournemouth, where she once again stated the Lib Dems would instantly revoke Article 50 and call a halt to the Brexit process, should they win the next General Election. Could markets see this as a glimmer of hope that Brexit might not happen? Seems unlikely given the total lack of any majority, but markets do tend to move on rumour rather than fact.

The pound’s rally could have been as a result of Boris Johnson’s apparent comments to German Chancellor Merkel, stating the UK would work with “energy and determination” to get a deal “ahead of Brexit on October 31st “. Having also reiterated numerous times though that he will “keep within the law” but will leave the EU on that day, one shouldn’t expect to much momentum to build and anyone with an upcoming currency conversion to make from sterling, might be prudent to lock in sooner rather than later, in case the overall negative sentiment surrounding the pound creeps back in.

The court hearing is due to last until the end of the week at least, but whether the prorogation is upheld, or the appeal is upheld, volatility on exchange rates is probably the only certainty.

Although markets aren’t really taking to much notice of the UK eco stats being released at present, we do have inflation figures this morning at 9.30am followed by EU inflation at 10 am and a speech from ECB member De Guindos at 11.50am.

After lunch, Canadian inflation figures are released, but the key release comes in the evening as the FOMC release their interest rate decision, policy statement and hold their press conference. A 25 basis point rate cut is expected and will be somewhat priced in, but any deviance from this will most likely cause cable to jump.

Overnight, the Kiwis release their GDP figures and a raft of Australian employment data comes out, so anyone with an antipodean exchange to make, be aware there could be movement overnight, so speak to one of the team today to avoid any risk.