GBP: Pushing higher ahead of Brexit talks
EUR: Markets paying little attention to increasing German cases
USD: Democratic convention begins

Sterling

Sterling has started the day optimistically, pushing towards the 1.32 figure in GBPUSD terms and recovering from a slight push lower yesterday against the European single currency.

Brexit talks restart in Brussels today with both the UK and the EU optimistic and hopeful that a deal can be put together by the end of September. Markets may be giving sterling the benefit of the doubt this morning but we don’t expect truly positive headlines, if at all, to come until September.

The optimism of Brexit talks are balanced out this morning for us by the news that Marks and Spencer has become the latest retailer to announce redundancy plans for as many as 7,000 staff.

Euro

Our expectations of dollar weakness yesterday played directly into our calls for EURUSD strength and the pair is back to trading in and around the 1.19 level this morning.

This is despite a wider increase in German Covid-19 cases to their highest level in 4 months yesterday. Markets are back to not taking too much notice of increasing viral cases currently but should such increases in turn trigger extensions of government support programs or wider economic issues given lockdowns then I’m sure we’ll be back to paying attention to them.

The European data session is quiet today with focus most definitely falling on the US calendar later in the day.

US Dollar

The Democratic National Convention kicked off yesterday virtually with speeches from Senator Bernie Sanders and former First Lady Michelle Obama. The conventions typically fire the starting gun for market interest in a presidential election.

For us, looking at the number of speakers at the Democratic National Convention who identify with the ‘progressive’ part of the party, there is the risk that speeches by Senators Warren and Sanders and Representative Alexandra Ocasio-Cortez increase the market belief that the US could see a higher redistributional tax environment under a Biden Presidency than is currently expected, something that may bee seen as a dollar negative.

Moves in equity markets yesterday were the main driver of currencies and the inability of the S&P 500 to be able to hold on to record highs offered the dollar a chance of a rebound but that has been snatched away this morning.

A survey of New York manufacturing showed the sector expanded in August at a slower pace than projected as more factories reported declining orders.

Elsewhere

Canadian finance minister Bill Morneau resigned unexpectedly last night following a disagreement with PM Justin Trudeau. CAD has yet to react decisively and will likely do so only when a replacement is announced, as markets price in a possible change in policy stance. We expect a certain Mark Carney to be mentioned more than most.

The NZD remains in the wars as ANZ Bank – a prominent local bank – updated its guidance on the economy joining those who believe that the Reserve Bank of New Zealand will drop interest rates below zero in the coming months.

Have a great day.