Global Themes

GBP/USD at over month high
- GBP/USD holds the $1.31 handle
- Is the financial crisis truly over?
- Super Mario saves the Euro
- Turkish Central Bank defies Erdogan 

GBP

GBP/USD holds the $1.31 handle
GBP/USD this morning opens above the $1.31 handle after poor US economic data released yesterday allowed the pound to capitalise. Yesterday the pair notched its 4th consecutive daily gain pulling further away from the year lows of $1.2660 seen mid-August.

A report by Bloomberg indicated that the UK and EU had made developments which could end the dispute over the Irish border, a major sticking point for both sides. Though positive headlines regarding Brexit are hitting markets, currency traders are still cautious about taking positions on the pound as they want to see concrete evidence of developments. GBP/EUR however remained flat for the majority of yesterday failing to pull away from the €1.12 handle and this morning it seems the pound could surrender that level.

The Bank of England held interest rates at its meeting yesterday with all 9 policy makers voting for no change. This was the expected outcome by many, with analysts forecasting rates to remain the same till H2 of 2019 after the UK exits the EU. However, the bank raised its forecast for Q3 GDP to 0.5% from 0.4%.

Again, no economic data from the UK will see the pound reactive to new Brexit developments.

USD

Is the financial crisis truly over?
10 years ago, the housing market bubble in the US burst, affecting financial markets globally. Today, around 51 million Americans are still suffering from the crash. Data showed that as of June 30th, nearly 1 in 10 American homes with mortgages were “seriously” underwater, according to ATTOM Data Solutions, meaning that their market values were at least 25% lower than the balance remaining on their mortgages. US house prices have fallen in the US for the last 3 months (source: Reuters). The next housing data release will be on the 26th of September, if this drops for the fourth consecutive month, it may start to become a concern for the Federal Reserve and its forecasts for future interest rate hikes, which could lead to dollar weakness.

Today, retail sales will be released, it is expected to drop a tick lower m/m from July to August, from 0.5% to 0.4%. A shock number above this could see the dollar recover some of the losses made this week. Yesterday saw US inflation y/y and m/m fall to 2.2% from 2.4% and 0.1% from 0.2% respectively. The fall hurt the dollar, with the US Dollar index falling to over 1-month lows of 94.41p this morning. 

EUR

Draghi saves the Euro
The European Central Bank (ECB) held interest rates yesterday and expects inflation to remain at 1.7% for the rest of this 2018 and 2019. However, President Draghi in his press conference stipulated that the ECB were still on course to start scaling back the stimulus programme in October’s meeting. The Euro rallied as a result of the announcement and EUR/USD has reclaimed the $1.17 handle this morning after being close to falling below the $1.15 at the start of the week. Global trade concerns were raised in yesterday’s press conference, but the ECB believes the labour market and rising wages will help support the bloc. 

TRY

Turkish Central Bank defies Erdogan
The Turkish Central bank raised interest rates by a staggering 625 basis points in an attempt to counteract the sell-off seen over the past few months. Interest rates now stand at their highest level since 2004. President Erdogan has been outspoken against raising interest rates on plenty of occasions, but the move yesterday was a way of showing that the central bank is under no influence from the President. GBP/TRY fell over 8% falling back below the 8 mark to trade at 7.9 this morning. 




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