The pound has been trading in a fairly tight range against a number of currencies as the market appears to be adopting a wait and see approach to the latest Brexit developments.
Yesterday a Scottish judge has rejected Boris Johnson’s attempt to push forward a no deal. This means in theory that he will have to abide with the law which means he will have to write to the EU to request an extension if no deal has been done by 19th October.
The letter could ask for an extension until 31st January next year which is part of Article 50(3).
In the meantime, the Institute for Fiscal Studies has claimed that a no deal Brexit could lead to UK debt hitting its highest level in 50 years. Borrowing could rise to £100bn and debt could soar to approximately 90% of the national income.
We could be in for a busy day on Thursday with a number of important economic data releases. Industrial and manufacturing production is due out as well as the latest Trade Balance figures for August.
Later that same day the latest NIESR GDP estimate is due out as well as Mark Carney addressing the markets. If his tone warns of difficulties ahead with Brexit then this could cause some movement for sterling exchange rates.
In what is a relatively quiet week for Eurozone economic data we could see some movement on Thursday.
Germany is the leading economy in the Eurozone and they are due to release their latest Export data as well as Trade Balance figures for August.
German manufacturing data has highlighted a real slow down recently hindered by Brexit as well as the issues in China. If the figures show another poor data release this could suggest that Germany may be heading towards a recession and this could have an impact on the value of the euro.
We end the week with German inflation data due out for September. With the European Central Bank having cut interest rates at last month's meeting if inflation shows another fall this could potentially provide evidence for further interest rate cuts to come on the continent.
German factory orders fell once again in August and this is the third month in a row to happen.
The pound is trading close to its lowest level against the US dollar since the start of September. Sterling is struggling owing to the ongoing uncertainty with Brexit although we expect to see further news coming out over the next few days.
US-China trade talks will commence once again this week but the chances of a deal being done appear to be relatively low. A Bloomberg report suggested that Chinese officials are unlikely to agree to the latest deal offered from Trump.
The US dollar appears to be seeing the benefit of being a safe haven currency which means investors will often buy the dollar in the midst of geopolitical uncertainty.
The US dollar is trading at its best level against the euro in over two years and remains relatively strong vs sterling. Fed Chair Jerome Powell is due to speak this evening so if you're in the process of a dollar transfer, you may wish to pay close attention to tonight's speech.
If Jerome Powell suggests that further monetary policy changes may be coming, then this could cause movement for the dollar. Arguably the most important day of the week for the dollar will be on Thursday. Initial jobless claims as well as the latest inflation figures for September are due to be released. Inflation expectations are for 1.8% so anything different could cause movement for the dollar.
The pound vs the Australian dollar has traded in a fairly tight range so far this week as the markets appear to be adopting a wait and see approach with Brexit.
The trade talks between the US and China are ongoing and with the Reserve Bank of Australia (RBA) having cut interest rates last week to an historic low, the Australian dollar could be facing some renewed pressure.
If we see the talks progress between the two strongest economic powers, then this could see the Australian dollar improve but a failure to take things forward could potentially pile pressure on the Australian dollar.
On Thursday Australia will announce its latest Consumer Inflation Expectations for October. The figures are expected to show 3.2% so any drop could put more pressure on the RBA to consider cutting rates once again.
We end the week with the Financial Stability Review published by the RBA which looks at the risks to the financial system. Therefore, if you're planning an Australian dollar transfer you may wish to pay close attention to this week's data releases.
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