Brexit optimism continues to underpin the pound, GBP/USD climbs above $1.25
Trade in the pound was mixed yesterday, with GBP investors guarded in the face of a UK Supreme Court hearing on the suspension of parliament.
Sterling is mostly rangebound this morning with GBP/EUR muted at €1.1269, GBP/USD subdued at $1.2470, and GBP/CAD flat at C$1.6534, while GBP/AUD and GBP/NZD hold steady at AU$1.8214 and NZ$1.9673 respectively.
Looking ahead, the Federal Reserve’s latest policy decision is expected to dominate currency markets today.
What’s been happening?
The pound initially struggled to find support on Tuesday as the UK Supreme Court launched its three day hearing on Prime Minister Boris Johnson’s proroguing of parliament.
The verdict could have significant consequences for the government’s Brexit strategy and will determine whether or not parliament should be recalled and whether Johnson will then be able to suspend parliament again to push through a no-deal Brexit in October.
Despite the political uncertainty Sterling was able to bounce back by the end of the European session, lifted by a general mood of Brexit optimism.
The euro scraped out some gains on Tuesday, with the single currency strengthening on the back of Germany’s stronger-than-expected ZEW economic sentiment index.
The US dollar was yesterday’s worst performer as USD investors brace for an upcoming Federal Reserve policy meeting and ignore some stronger-than-expected US industrial production figures.
What’s coming up?
The Fed’s latest policy decision will be centre-stage today, with the US central bank expected to lower September rates to 2% as the Federal Open Market Committee (FOMC) attempts to protect the US from a slowing global economy.
With the rate cut priced in by markets, any subsequent movement in the US dollar is likely to be informed by the bank’s forward guidance.
The UK’s consumer price index (CPI) will be in focus for GBP investors today, with the pound potentially yielding ground if August domestic inflation slowed in line with expectations.
Finally, the euro could face headwinds as this morning’s Eurozone CPI reading is predicted to confirm the bloc’s August inflation stalled at just 1%.
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