……...on surging no-deal Brexit fears
The pound remained on the defensive yesterday, even passing the psychological $1.30 barrier in response to rising Brexit jitters.
Sterling continues to retreat this morning, with GBP/EUR dipping to €1.0984 and GBP/USD sliding to $1.2927. GBP/CAD is muted at C$1.7136, while GBP/AUD and GBP/NZD have stumbled to AU$1.7923 and NZ$1.9528, respectively.
Coming up, could we see more Brexit jitters extend the GBP sell-off into a third session today?
What’s been happening?
This week’s GBP sell-off gathered pace on Tuesday, with the pound falling roughly 1% against the US dollar and almost a cent against the euro in response to growing fears that the UK is hurtling towards a no-deal Brexit.
As the latest round of talks got underway, rising tensions between the UK and EU cast significant doubt on the chances of any meaningful progress towards a deal being made.
Adding to Sterling’s woes was the news that the head of the UK’s government legal department had resigned, reportedly in response to Boris Johnson’s suggestion his government may override part of the EU withdrawal agreement.
At the same time, the US dollar was propelled higher through yesterday’s trading session as skittish investors flocked to the safe-haven ‘Greenback’.
The souring of risk-appetite was attributed to both Brexit uncertainty as well as fresh US-China tensions after Trump waxed lyrical on the possibility of the US economy decoupling from China.
The euro also edged higher on Tuesday, with the single currency finding support as the latest Eurozone GDP estimate saw the contraction in the bloc in the second quarter revised up from 12.1% to 11.8%.
What’s coming up?
Turning to today’s session, we expect that Brexit uncertainty will remain a key concern for GBP investors in the absence of any notable GBP data releases, likely ensuring the pound extends its losses into a third consecutive session.
The US dollar, meanwhile, could trend higher later this afternoon if the latest JOLTs figures report that US job openings increased in July.
Finally, in light of the impending rate decision by the European Central Bank (ECB), it’s likely that EUR investors will want to avoid making any aggressive bets today, potentially leaving the euro without any strong directional bias.
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