GBP: Brexit talks begin today
EUR: Stimulus hopes maintain upward move
USD: Not so special anymore

Sterling

The weakness in the USD that characterised markets towards the end of last week has continued and GBPUSD finds itself at 3 week highs versus the greenback.

We can see from other sterling pairs that the majority of this move is coming from dollar weakness as opposed to the pound picking up strength. Sterling will fall back into focus towards the end of the week as the latest round of Brexit trade talks conclude on Friday, having started today.

We do not anticipate much movement from either the EU or UK and that sterling could easily peter out by the time we down tools for the weekend.

Data is back this week with the latest reading of sentiment from the UK’s manufacturing sector at 09.30. Expectations are for an improvement in the overall headline number although it remains the services sector that will see the UK economy return to feast or remain in famine.

Euro

News over the weekend has been few and far between from Europe although the upside pressure put on the euro by the belief that the EU has hit upon a stimulus package that most countries can get behind has failed to dissipate.

Manufacturing PMIs from Germany, France, Spain, Italy and the wider Eurozone are due this morning.

US Dollar

The main driver of currency markets this morning is widespread dollar weakness as investors continue to buy risk assets, unbowed by the Trump administration’s threats to China and looking through the latest round of unrest in over 40 US cities over the death of George Floyd at the hands of a police officer.

For now, the flow of both fiscal and monetary policy stimulus is enough to make investors look through these issues. It will take a lot more the White House on trade to stop the USD.

Elsewhere

Chinese manufacturing data over the weekend showed growth for the first time since March, boosting regional assets.

The AUD will be in focus overnight with the latest RBA meeting. Given inflation is expected to start running below zero soon in Australia and the AUD has put on close on 10% in the past 2 months, we would expect that the central bank will maybe up the rhetoric around further loosening of monetary policy, and push the currency lower.

They announce at 05.30 BST tomorrow morning.

Have a great day, and please take care.