Global Themes

  •  Can GBP/USD hold above $1.30?
  •  Sluggish Eurozone manufacturing concerns
  •  China’s Yuan eyes best week in six

GBP

Can GBP/USD hold above $1.30?

Sterling is on track to snap a 3-week losing streak against the US Dollar thanks to Brexit optimism, positive labour market data and broad-based dollar weakness. GBP/USD appears to have broken away from February’s downtrend as Sterling hopes to end the week above $1.30 for the first time since January.

Market participants remain optimistic that Prime Minister Theresa may will either succeed in getting a tweaked deal through parliament before March 29 or that Article 50 will be extended. GBP/USD continues to trade above $1.30, but as the political turmoil intensifies, there risks a Sterling retreat. Rumours have surfaced that as many as 25 cabinet members of the PM’s own party will vote for a Brexit delay unless a “no-deal” scenario is ruled out of the equation. Similarly, the Eurosceptic Conservative MPs have also warned they will turn on the government if “no-deal” is removed as it takes away the UK’s bargaining power.

  •  The PM is getting pushed and pulled in both directions and the pressure is ramping up. Next week is gearing up to be a crucial week for the UK and Sterling as traders wait in anticipation of Ms May’s update to the Commons on Feb 26 and the chance for MPs to debate and vote on the next steps on Feb 27.


EUR

Sluggish Eurozone manufacturing concerns

Flash PMI data yesterday revealed that Eurozone manufacturing sector activity slipped into contraction territory in February. The other sectors lifted only slightly from multi-year lows, indicating the Eurozone economy remains close to stagnation. GBP/EUR flirts with €1.15.

The top headline this morning is German Ifo business climate survey at 9:00am but the final Eurozone inflation readings at 10:00am will also be watched closely. Should the Ifo survey fall by a bigger margin than forecast, the Euro could suffer today. EUR/USD has staged a valiant recovery this week after closing at its lowest level since June 2017 last week. However, the pair could lose momentum and retrace back below $1.13 today.

  •  GBP/EUR continues to trade in the top end of its near 2-year trading range. The pound has found it difficult to hold above the €1.15 level for a sustained period of time, but despite the rocky month against the US Dollar this month, Sterling has held above €1.13 versus the Euro, building support at higher levels.


CNH

China’s Yuan eyes best week in six

Amidst the optimism that the US and China are nearing a trade deal, China’s Yuan is on track to record its biggest weekly gain in six versus the US Dollar. A Reuters report stated a framework deal is being sketched out that will prevent a bump up in tariffs being imposed by the US.

Conversely, thanks to Sterling strength, GBP/CNY is battling to end the week on a high having endured three straight weekly losses. Sterling could find this a challenge though if the Yuan picks up more momentum before the week is out.

  •  President Donald Trump is expected to meet China’s Vice Premier Liu He today to wrap up what’s been a positive week of trade talks.


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