Get Started

Currency Market Analysis

Aug 22, 2019 | Currency Market Analysis

Global Themes

Brexit talks continue
- Brexit lifeline for Boris
- Powell speech in focus
- Flash PMI data for EU and US


Brexit lifeline for Boris
Prime Minister Boris Johnson will meet with French President Emmanuel Macron today in Paris. Mr Johnson met with German Chancellor Angela Merkel yesterday, who suggested it was possible that the European Union (EU) might be willing to renegotiate the withdrawal agreement to avoid a no-deal Brexit. However, the PM will need to find an alternative solution to the Irish backstop in the next 30 days. Given that the UK and EU have gone back and forth over the backstop it seems unlikely that Mr Johnson will find a solution so quickly. 

Mr Macron is expected to be more unaccepting to the PM's Brexit demands, after he claimed yesterday a no-deal Brexit would be of Britain's own making and not the EU's. 70 days remain before the UK's scheduled departure and EU leaders still appear reluctant to renegotiate.

Sterling remains relatively unaffected thus far from the Brexit news, remaining above key support levels. GBP/USD has closed above the pivotal $1.21 level for 4 consecutive days, while GBP/EUR has closed in the €1.09 level over the same time period. GBP/EUR is 2% up from the year low of €1.0720, the lowest level the currency pair has seen since October 2016. 


Powell speech in focus
Today is the beginning of the Jackson Hole Symposium where Central Bankers from around the world meet to discuss economic policy. The focus however will be on Federal Reserve (Fed) Chair Jerome Powell’s speech on Friday. US President Donald Trump has been openly critical of the Fed and calls for aggressive monetary easing. 

The Dollar has remained relatively strong after the inversion in the treasury yield curve. This is a signal of a possible recession highlighted earlier this week. Money markets still forecast an interest rate cut from the Fed at its next meeting, however the direction of the dollar could be dependent on the tone from Mr. Powell on Friday.  

EUR/USD remains sub $1.11 this morning, however downside momentum could halt towards the lower levels of $1.10 which has offered long term support since Q2 of 2017. 

PMI Data

Flash PMI data for EU and US 
Today Eurozone and US flash PMI will be released at 9:00am and 2:45pm respectively. Both areas will release Markit composite, manufacturing and services data with data from the EZ forecast to come in weaker than previous. Should the numbers fall lower than the market expectation the Euro could come under further pressure. Especially with the European Central Bank (ECB) expected to cut rates before the year is out. Alongside this, the ECB monetary policy meeting accounts will be released at 12:30pm. Traders will be looking for any further confirmation that the ECB will cut rates before year end. 

The US data is forecast to be a mixed outcome with manufacturing set to show an increase. However, investors who monitor the US Dollar will be mainly focused on tomorrow's Jackson Hole Symposium. 

Get the daily currency market analysis in your Inbox

Published five days a week, this newsletter provides day-to-day trends and activities affecting the market in easy-to-understand snapshots.