GBP/EUR – Pound Benefits as Parliament Pushes Back Against Johnson
A series of parliamentary defeats for Prime Minister Boris Johnson, combined with cross-party rejection of his calls for a snap general election, boosted the Pound (GBP) to multi-week highs.
The opposition and Tory rebel MPs successfully passed a legislative bill which required the British premier request an extension to the October 31 Brexit deadline, effectively taking a no-deal outcome off the table. The resulting market optimism provided support for Sterling.
However, with parliament suspended for the next five weeks and the Conservative government refusing to comply with the terms of the bill, an air of political uncertainty is certain to weigh on the Pound in the days ahead.
GBP/USD – Surprise UK Growth Shores up Pound
Britain’s gross domestic product strengthened to 0.3% in July, easing fears for a third quarter recession and offering some incentive to GBP investors.
However, if Thursday’s RICS house price balance shows Brexit is having a detrimental effect on UK property prices, this could raise concerns about the strength of the British economy.
USD/GBP – Underwhelming Labour Market Report Drags on US Dollar
The US Dollar (USD) faltered on the back of Friday’s labour market report as it revealed a smaller increase in employment than forecast.
Any improvement in the US-China trade dispute could increase market risk-appetite and subsequently drag on USD exchange rates.
Demand for the US Dollar could also weaken on Thursday if the US consumer price index matches forecasts and eases from 1.8% to 1.7%.
While the index is not the Fed’s preferred measure of inflation, a reduction could encourage expectations for imminent monetary loosening from the Fed.
EUR/USD – Euro Volatile Ahead of ECB Policy Announcement
Speculation that the European Central Bank (ECB) will refrain from launching aggressive stimulus measures at its September policy meeting helped to shore up the Euro.
However, optimism could be short-lived as the waning strength of the Eurozone economy is likely to spur a dovish tone from the bank’s policymakers. An interest rate cut could cause the single currency to lose ground ahead of the weekend.