Economic Calendar

  • 12:45pm ECB Monetary Policy Meeting & Press Conference
  • 13:30pm  US Unemployment Claims

Analysis

Sterling retained a firmer tone on Wednesday with intensive Brexit chatter and parliamentary debate having little overall market impact.

The US ISM non-manufacturing index strengthened to 55.3 from 53.9 the previous month, although this was slightly below consensus forecasts.

The dollar initially lost some ground following the data as underlying sentiment remained weak and EUR/USD advanced to highs close to 1.1950.

The Euro was hampered by a fresh round of ECB source reports which suggested that the central bank would only have proposals to discuss at this week’s meeting with no decision on next year’s quantitative easing plans until late October.

The dollar also gained a boost from reports that Congress and the Administration would reach a compromise deal to raise the debt ceiling for 3 months and tie the measure to agreeing Hurricane Harvey relief funds.

Relief over the debt issue provided some dollar support and EUR/USD declined to lows near 1.1900 before stabilising.

The UK currency continued to gain some support on valuation grounds with GBP/USD at a 1-month peak around 1.3080 before fading slightly. GBP/EUR rallied to a high at 1.0950 before stabilising with the probability of tough resistance on any approach to the 1.1000 area.

Markets will monitor parliamentary debate on the Brexit repeal bill and any defeat for the government could trigger limited Sterling losses.

The ECB meeting will still dominate on Thursday with the potential for volatile trading during President Draghi’s press conference.  Sterling’s tentative recovery would be in jeopardy if the ECB takes a hawkish tone and fails to weaken the Euro.

 

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