Progress in Berlin for PM? Next stop, Paris

Whilst Prime Minister Johnson appeared to make some headway in Berlin, it’s expected his visit to Paris today could be more tenuous. GBP as a result remains at a low ebb, as we hinted in yesterday’s blog. GBPUSD in particular slowly grinds down close to the key 1.2100 pivot level of recent sessions.

USD

Yesterday’s Federal Reserve Minutes on US interest rates initially threw some confusion into FX markets. A split between policy makers some asking for a 50bp cut and others no cut at all. Remember this all shrouded by recent Trump tweets looking for a full one percentage point cut. The plot thickens. It would certainly appear that low US inflation, a looming global trade war and potential Brexit headwinds are muddying the waters. But the USD has held on to recent gains across the board for now.

The losers overnight however were the Commonwealth group of currencies NZD, AUD and CAD. The Kiwi Dollar in particular seeing its lowest posting against the USD since 2016, and opening up potential further downside as the Reserve Bank of New Zealand ponders further interest rate cuts.

As a result, it’s better news for UK importers with exposures to this currency group. GBPNZD above 1.90, albeit a small move in the grand scheme of markets is opportunity to lock in better rates on a short-term basis.

The day ahead

Today Europe gets the major focus with key German manufacturing numbers closely eyed for any further weakness. This data alongside political manoeuvres in the form of France’s President Macrons meeting with the Prime Minister of the UK. A break in the Brexit deadlock whilst seeming unlikely at this stage, would be welcomed by the FX markets.

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