GBP: Johnson speech at 11.30

EUR: Grinding higher

USD: Trump heads back to the White House

Sterling

Sterling is unconvincing this morning; a minor break through the 1.30 level overnight in GBPUSD with GBPEUR holding above the 1.10 level.

Brexit news is thin on the ground today but represents a background headline risk for sterling throughout the day. The focus for sterling today will be PM Johnson’s speech at the virtual Conservative Party conference. Chancellor Sunak’s speech yesterday promised to balance the books after the increase in spending by the government during the pandemic; tax rises are coming it’s just not clear where they fall.

Johnson should be speaking at around 11.30am.

Euro

The single currency is very quiet at the moment and we would expect it to follow the broad trend against the USD through the session. Christine Lagarde speaks later and may add to her recent thoughts about additional stimulus for the Eurozone economy.

US Dollar

“Don’t let it dominate you. Don’t be afraid of it. You’re going to beat it … Don’t let it take over your lives. Don’t let that happen … As a leader I had to [leave hospital]. I know there’s a danger to it, but I had to do it. I stood out front. I led. Nobody that’s a leader would not do what I did. I know there’s a risk, there’s a danger, but that’s OK. And now I’m better, and maybe I’m immune. I don’t know. But don’t let it dominate your life.”

Trump has left hospital despite obviously still suffering from the effects of Covid-19 and has returned to the White House with his actions bolstering the idea that Covid-19 is not something the average American should be concerned about.

Dollar remains concerned about it and Trump’s decision to leave hospital hasn’t buoyed stocks as much as one would expect.

Hopes remain that Congress will be able to agree on a stimulus plan before the election. Democrats have proposed a $2.2 trillion package to respond to a pandemic, while Republicans have suggested a $1.6 trillion response. Any package would likely be risk positive – dollar weaker – in our opinion and, necessary given the signs from last week’s payrolls numbers.

Elsewhere

As the Australian government’s budget is being announced as I write this, the AUD is weakening following comments from the Reserve Bank of Australia. While the bank decided to keep interest rates as is for now, they dropped a fairly heavy hint that rates will fall next month.

Governor Philip Lowe concluded his statement accompanying the rate decision by saying that the RBA “continues to consider how additional monetary easing could support jobs as the economy opens up further”.

Markets are currently pricing in a 72% chance of a cut in Australia next month.

Have a great day.