Sterling slumps as Theresa May admits ‘impasse’ in Brexit negotiations



GBP/USD touched 1.33 on Thursday, its best level since mid-July after stronger prints for UK CPI and retail sales but it nosedived on Friday as Sterling dropped after Prime Minister Theresa May said Brexit talks have reached an impasse.

The pair has reclaimed $1.31 this morning despite a lack of any notable Brexit developments over the weekend – sources have suggested that aides for PM May have begun contingency planning for a snap election in November.

Brexit developments will continue to drive markets. Looking ahead, Bank of England Governor Carney speaks on Thursday while GDP follows on Friday.


The Dollar Index is flat this morning at around 94.15 having rebounded from a ten-week low on Friday at 93.81. The global reserve currency was put under pressure by gains in emerging markets while stronger domestic survey data provided some support including Philly Fed and Markit PMI.

Investors are now looking ahead to the FOMC policy meeting with policymakers expected to raise rates another twenty-five basis points on Wednesday. GDP data follows on Thursday.


EUR/USD topped out last week at just above 1.18 on Friday morning before falling into the weekend on sub-par PMI data, notably soft German manufacturing. There has not been much reaction so far to the slightly stronger German IFO released in recent trade.

Looking ahead, Euro Zone confidence indicators and German CPI are out on Thursday while Euro Zone CPI, German unemployment and retail sales are out on Friday.


USD/JPY hit a nine-week high on Friday at 112.89 as demand for the perceived safe-haven currency was limited by record highs on Wall Street. Friday’s CPI data was largely a non-event, following on from a fairly routine Bank of Japan policy statement on Wednesday.

Looking ahead, Bank of Japan Governor Kuroda speaks twice this week while Tokyo CPI, unemployment, retail sales and industrial production are all out on Friday.


The Swiss Franc finished Friday as one of the strongest G10 currencies. USD/CHF hit a low of 0.9542 on Friday which is the lowest level since mid-April. There was not much reaction to Thursday’s policy statement although policymakers did opt to label the Franc as ‘highly’ valued again.

USD/CHF has edged back above 0.96 this morning as we look ahead to ZEW data on Wednesday and KOF on Friday.


The Australian Dollar hit a three week high versus the Greenback on Friday at just above 0.73 as investors opted to look through the latest escalation in the US-China trade spat. Rating agency S&P provided some support to the Antipodean after affirming their AAA sovereign credit rating and revising the outlook to stable.

The pair has kicked off this week slightly softer however as US tariffs on China come into effect and the WSJ reported that China have cancelled planned trade talks.


The Canadian Dollar saw a choppy end to the trading week on Friday having rallied on the CPI/retail-sales data before falling on comments from White House advisor Hassett regarding NAFTA. USD/CAD has edged higher this morning to around 1.2940.

Looking ahead, Bank of Canada Governor Poloz speaks on Thursday while GDP and producer prices follow on Friday.


The New Zealand Dollar is flat versus the Greenback this morning having hit a three-week high on Friday at 0.6700. Antipodeans had largely looked through the latest escalation in the US-China trade dispute and the Kiwi Dollar received a further boost from a domestic GDP beat and favourable rating action from Moody’s.

Looking ahead, the RBNZ meet on Thursday and are widely expected to leave the OCR on hold at 1.75%.


The Swedish Krona finished Friday as one of the strongest G10 currencies for the week. The Scandi currency got off to a strong start last Monday, supported by comments from Riksbank Governor Ingves who said they are nearing a rate increase.

EUR/SEK continued to nudge lower through the week before reaching a six-week low on Friday at 10.3111.


The Norges Bank raised the key policy rate by twenty-five basis points on Thursday, but the Krone still weakened as they also pushed back expectations for the next increase to the first quarter. EUR/NOK had touched a six week-low in the run up at just below 9.5 before topping out at 9.62 and has begun this week at around 9.57.

Looking ahead, we await unemployment data tomorrow followed by retail sales on Friday.


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