‘Cable’ plunged to a fresh seven-week low at the start of this week’s session as ‘Brexit’ concerns were stoked by UK Prime Minister Theresa May’s plans to begin the divorce process by the end of March 2017.
Clinton Trump Debate In Focus
The beginning of last week’s session was dominated by the first televised Presidential election debate between Hillary Clinton of the Democrats and Donald Trump of the Republican Party.
Markets were worried that a strong Trump showing could boost his position in the polls and potentially weigh on risk sentiment as his outlandish policies are viewed as negative for global economic sentiment. However, the debate was seen as a success for Clinton and subsequently risk appetite returned on Tuesday and helped GBP/USD rally back above 1.30.
‘Cable’ traded flatly on Wednesday as Bank of England Governor Mark Carney spoke positively about the UK’s post-referendum economic performance but Deputy Governor Minouche Shafik noted that it was better to loosen prematurely than after it was too late. In the US, durable goods orders printed at 0.0%, beating forecasts of -1.5%.
Theresa May’s ‘Brexit’ Plans Weighs On Sterling
US second quarter GDP was revised up from 1.1% to 1.4% on Thursday, which boosted the ‘Greenback’ slightly as December Federal Reserve rate hike bets increased.
Friday saw an upgrade to the UK Q2 GDP figure, from 0.6% to 0.7%, but Sterling sentiment deteriorated sharply over the weekend as UK PM Theresa May outlined plans to begin the UK’s two-year divorce process from the European Union before the end of March 2017. May also suggested that the UK government was planning to break from the single market, which added to the Pound’s problems.
GBP/USD tumbled by around -120 pips following the announcement to hit a new seven-week low and came within half a cent of striking a fresh three-decade low.
Week Ahead
The two main events to look out for on the economic calendar this week are Wednesday’s UK service sector report and Friday’s US non-farm payroll print.
Earlier today UK manufacturing printed at its strongest level for two years but demand for the Pound remained soft. However, we could see Sterling mount a mini recovery if the services PMI, which makes up for around 80% of total UK GDP, also surpasses market expectations.
Friday’s US NFP report is tipped to show that 170,000 new jobs were added to the world’s largest economy in September, which is liable to bolster the appeal of the ‘Greenback’ as December rate hike bets rise. However, a disappointing number could give the impetus back to the embattled Pound.