It’s been a relatively uneventful start to the week, with equity markets in Europe trading a little mixed while those in the US open flat. The FTSE is clearly the outperformer in the European session so far buoyed by both the weaker pound sterling and the gains in commodity markets.
Donald Trump’s Global Tour in Focus on an Otherwise Quiet Day
The first day of the week is quiet in terms of economic data or events. US President Donald Trump’s global tour will be of interest to the FX market although we do appear to be seeing a more reserved version of himself so far, which will come as a relief to many. The political storm at home is unlikely to go away but it may take a bit more of a backseat this week. We will hear from two voting members of the FOMC today, with Neel Kashkari, Lael Brainard and Patrick Harker both scheduled to make appearances.
GBP Weighed Down as May’s Poll Lead is Cut in Half
The pound is coming under some pressure this morning, weighed down by comments from Brexit Secretary David Davis and polls over the weekend that showed the Conservatives lead over Labour has been slashed. Davis’ claim that the UK will quit talks with the EU if the reported Brexit bill isn’t revised lower appears to be putting some pressure on the currency. While the pound remains vulnerable to suggestions that talks could break down, this could be another case of stakeholders preparing for tough negotiations while threatening things they ultimately will try to avoid at all costs.
The polls released over the weekend may also be contributing to moves in the pound this morning, with the Conservatives lead over Labour having halved in some cases. A large majority for the Conservatives is viewed as beneficial by some when it comes to the Brexit negotiations as it gives them a strong mandate while enabling them to take a softer approach when necessary without having to rely on the support of some of the bigger eurosceptics in the party.
GBP/USD Pares Friday’s Gains But EURGBP Looks More Bullish
It is worth considering though that while sterling is among the worst performing currencies today, the loss against the dollar only equates to around half of the gains made on Friday.
The reality may well be that the apparent negative news is aiding a small correction that was on the cards regardless. That said, it is suffering a little more against the euro, with today’s moves having taken the pair through an interesting technical level that may signal further downside for the pound.