With less than 2 months until the latest Brexit deadline, many had expected September to a busy month for UK Politics and the first day of the month certainly set the tone. 

Monday started off with news that any Tory MP choosing to vote against the government in the House of Commons this week, in an attempt to block a potential No-Deal on 31st October, would be thrown out of the party and banned from standing for the Conservatives at the next election (that could be sooner than we thought, read on to find out when). This is a big gamble for PM Boris Johnson to take as his party already holds the slimmest of majorities but it is a move he feels he has to take. This could be to deter those who are tempted to vote against the government, in hope that they back down to save their jobs.

What Could Happen to Sterling Exchange Rates?

Oppositions MPs announced plans are in motion to fast track a new bill through the commons to delay Brexit until 31st January 2020 if a suitable agreement can not be agreed with the EU by the 19th October – the day after the European Council meeting concludes.

Boris Johnson ended the day by declaring he would call a snap election on 14th October if he is defeated by MP’s opposed to a no deal Brexit later today. The prospect of another election could be causing further worry for markets and a drop in pounds value may have been driven by all the uncertainty. 

Adding further to the pressure on the pound, UK Manufacturing also contracted again posting a number of 47.4 against the expected figure of 48.4. You may wish to stay in touch with your account manager to see how developments today have an effect on pounds value.

Further Germany recession fears

Key German manufacturing data again continued to fall short for EU’s biggest economy, worsening fears that the Germany’s economy could drop into a recession the coming quarters.  This followed Friday’s data release confirming the latest Consumer Price Index inflation rate also fell shorter than expectations. This may indicate that the European Central Bank has a big job on its hands if it is steer the Eurozone ship away from the heading towards another recession, at a time when majority’s of its countries spent the last few years still recovering from the last one.

At 10.30 this morning data for the Eurozone will confirm its latest Producer Price Index, with a slight increase forecasted to show 0.8% from 0.7% Y/Y and – 0.3% from – 0.6% M/M.

US Data

US Non-Farm payroll figures released end of week

Yesterday the US celebrated Labour day, it was a pretty uneventful day to report on anything new coming from States side. The US dollar still managed to have a strong day trading reaching its highest level against the Euro since May 2017 and achieved close to August’s highs against the pound which was also the best seen for the dollar since Jan 2017.  As No Deal Brexit concerns for the UK and growing recession fears for the Eurozone troubled both currencies.  The remainder of the weeks sees speeches from various Federal Reserve members and a flurry of data releases for the US, including the biggest indicator for the US economy, Non-Farm Jobs numbers out on Friday.

RBA keep interest rates on hold

This morning The Reserve Bank of Australia (RBA) as expected kept interest rates on hold, deciding against going beyond already record low rates of 1%.  The RBA said once again that it was reasonable to expect an extended period of record low rates, with markets pricing in further reductions in 2020. With RBA keeping rates on hold, the AUD may have withheld further losses, particularly seeing strong performance against the weak pound which remained under pressure due the conflicts within the UK government as the Brexit deadline looms with no solution in sight.  Australia also released Retail sales figures for July, sales fell by 0.7% for the month and annual growth fell by 2.4%, the lowest growth reported since January 2018, with lower growth only posted fives times in the last 5 years. Despite the fall in sales ANZ analyst's expect to see stronger number released in August helped by the tax cuts seen in late July/August.

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