RedFX Snap: Bank of England warns on growth
With global tensions heightening, and the USD whipsawing back and forth, 2020 has started in a lively fashion.
GBP: Full Reuters article below, but Governor Carney hinted that if UK weakness continues, then the Bank of England will cut rates. At the last meeting, 2 of the 9-member committee voted to cut, but it now appears that the raft of weak data is being taken seriously.
GBP/USD falling to a 2-week low on the back of the headline.
The slight strengthening of last week’s PMI data was the only shining light in the services, consumer and manufacturing data.
https://uk.reuters.com/article/uk-britain-boe-carney/carney-says-boe-could-cut-interest-rates-if-weakness-persists-idUKKBN1Z813Q
With John Lewis reporting disastrous Christmas trading, and industry data showing consumers cutting back on spending, it appears that slowing wage growth is taking its toll on the previously resilient consumer sector.
Brexit: This morning the EU’s chief negotiator said that a full agreement on the terms of Brexit will take longer than the 11 month transition period which starts at the end of January. 2019 was a year of deals, no deals and ‘negotiating’ – GBP didn’t like the uncertainty. 2020 seems to be shaping up to be incredibly similar, and many commentators have already stated that they see recent GBP strength as temporary, and that the second half of 2020 will be very difficult for GBP
https://www.reuters.com/article/us-britain-eu-barnier/eus-barnier-says-a-year-not-enough-to-agree-full-deal-with-uk-idUSKBN1Z80XV
USD: Tomorrow’s employment data will be closely watched, as ever, and next before the end of the month we will have PMIs and real GDP (Thursday 30th) to give clarity as to the strength of the US economy. Federal Reserve members speeches later this afternoon will add to the market’s knowledge of the mindset of the Fed as we go into 2020.
As the US attempts to calm markets by focussing on sanctions and negotiations instead of war, safe-haven currencies are giving back losses. Amongst safe havens are USD, CHF JPY – all of which have given up previous gains: EUR/USD down from 1.1200 to 1.1100.
AUD: Suffering with AUD/USD around 0.6860 after holding near 0.700 through the end of 2019.