Prime Minister Theresa May suffered a disastrous Tory Party Conference speech last Wednesday when she was handed a “joke” P45; seemed to swallow a fly, refrained from swallowing a spider to catch the fly but did suffer a coughing fit so violent that it literally sent one of the last remaining flying F’s off the wall!

Now the writing may actually be on the wall for our Foreign Secretary and occasional author, Boris Johnston, instead of the PM. Talk of a Cabinet reshuffle can be heard around Westminster. The next round of P45’s may be no joke for GBP value which fell amid uncertainty for this UK government’s future but looks like it is making a slight comeback against USD and EUR as we get into this week. 

GBP/USD

The US jobs report on Friday was mixed. Non-farm payrolls fell by 33,000, the first decline in seven years, reflecting the effects of multiple extreme weather systems. However, this was countered by other encouraging reports such as the unemployment rate falling from 4.4% down to 4.2% and average earnings jumped by 0.4% to 2.9% surpassing expectations.

Despite the uptick in GBP value against USD today, possibly caused by the US having a public holiday today and speculators may be hoping to pick up GBP at a slight discount after a steep drop last week, we are likely to see a further push against GBP by USD as the week progresses. Tomorrow (Tuesday) morning is likely to be busy for GBP as both Manufacturing and Industrial Production figures are due for release at 0930hrs, along with trade balance figures. This will likely set conditions for how the rest of the week will progress.

GBP/USD movement can be seen on the graph below, now that the graph machine is fixed:

GBPUSD 09-10-2017.png

GBP/EUR

Whilst Theresa May might be trying to build a country that works for everyone, little was reported on what was said in relation to the policy initiatives she announced on housing, organ donation and energy prices. The Home Secretary, Amber Rudd, appeared to have to tell Bo Jo that he needed to stand and support his boss. He did as he was told in that instance but for how much longer can he hold on to his position? Perhaps only for as long as he backs off from calls for the PM’s resignation. The politically-driven GBP might take comfort from signs that Theresa May is likely to stay on as leader of the Conservative Party, at least for now.

 

The coming week is a key time for Brexit negotiations as it will be the last week of talks before the EU summit to determine whether sufficient progress has been made to move onto Phase Two. The consensus expectation is that progress will not be judged sufficient to move on but it remains to be seen how real Brexit Fatigue is and how much the market will have already priced in the outcomes.

GBP/EUR movement can be seen on the graph below:

EUR/USD

 

EUR/USD was under pressure once again, dropping for the second week in a row showing how things don’t matter until they suddenly start to matter and cause generates effect. This could be evidenced by the market recently having to digest the political events surrounding Catalonia and the continuing political stand-off. In addition, dovish comments from the ECB weighed on the common currency. In the US, data has been mostly positive. The NFP was “distorted” due to the hurricanes but still consisted of higher wages. The odds for a rate hike in December remain very high.

 

What little Euro movement there has been against the Dollar can be seen on the graph below:

Not trading your currency is still a risk. The markets will move, volatility and relative values will vary but whatever your foreign currency exchange and international payment needs, you can rely on the team here at Aston Currency Management. Please do not hesitate to get in touch with us, we look forward to hearing from you. Have a great week.

Written by Damien Lipman