RedFX: UK parlimentary decision not great for GBP
GBP: PM Johnson won parliamentary backing to pass the Internal Market Bill which effectively break the Brexit Agreement. 360 votes to 263. Brinkmanship continues, and headlines will continue to push GBP in both directions, but GBP feel on the news last night, GBP/EUR at 1.0815 and GBP/USD at 1.2820.
We have seen customers happy to Sell GBP/EUR around 1.1300, and to buy around 1.0800. A sustained break through 1.0780 opens up a new ‘technical trading range’ – worth noting for all those with an eye on this.
UK Employment - The headline may look bad, but SOME the detail is not as terrible as expected:
Britain’s unemployment rate rose for the first time since the coronavirus lockdown began in March, but official data published on Tuesday also showed a less severe fall in employment than feared.
The unemployment rate increased to 4.1% in the three months to July from 3.9% in the April-June period.
The terrible news is that those aged between 16 – 24 were the victims of the biggest fall in employment. On top of which, economists expect more jobs to be lost as the government’s huge job retention subsidies are wound down before expiring at the end of October
The good news was that the fall in the number of people in employment was a relatively small 12,000 compared with a median forecast for a fall of 125,000 in the Reuters poll. Figures from Britain’s tax office showed the number of staff on company payrolls fell by 695,000 between March and August.
This week – Thursday’s central bank meeting and announcements will give us key take-aways regarding the UK economic outlook and forecasts – Thursday is a big day for GBP.
EUR: On a stable footing recently – all eyes on this morning’s German ZEW data this morning.
USD: Wednesday night is pivotal, with the Fed announcing its monetary policy decision. As trade tensions with China stay to fade, the USD gains ground.
AUD: Benefitting from optimistic Central Bank comments, which dismissed fears of an appreciation in the currency. Also driving the strength was reports of 0 new Covid cases overnight, and decent Chinese Retail Sales and Industrial Production data. However, the markets expect low rates for a prolonged period in Australia, and at the meeting, Members considered it likely that fiscal and monetary support would be required for some time – supporting this, and leaving AUD open to directionless trading.
The ‘sustained recovery’ in China is boosting global optimism – it is worth monitoring how much sustained ‘good data’ comes from China in the coming months.