September 6, 2019 — 4 min read
Yesterday saw hopes of a de-escalation slow to an almost grinding halt, after another defeat for Prime Minister Boris Johnson at the hands of a parliamentary opposition that's been strengthened by rogue MPs originally elected to the Conservative Party. The opposition and its allies have voted to force the Prime Minister into requesting another extension of the Article 50 negotiating window, tying his hands in negotiations with the EU and opening a constitutional can of worms.
Pound Sterling has rebounded sharply from earlier losses this week, as markets eye a window of opportunity that's now open for MPs to block the UK's path out of the European Union for a third time, more than three years after a majority voted to leave in the June 2016 referendum. The bill will not become law unless and until it receives Royal Assent, a process over which the Prime Minister exerts substantial control.
The latest developments in parliament further increased odds of a soft Brexit which - coupled with a follow-through US Dollar pullback from multi-year tops - further fueled the positive momentum and pushed the pair to over one-month high level of 1.2354.
However, optimism over the resumption of US-China trade talks, which led to a strong rally in the US Treasury bond yields, helped ease the recent USD bearish pressure. Bond yields rallied further in reaction to Thursday's upbeat US economic releases - ADP report and ISM non-manufacturing PMI - and provided a goodish intraday lift to the greenback, which eventually turned out to be one of the key factors that kept a lid on any further gains for the major, at least for the time being.
The pair held steady over night as the market focus now shifts to the release of the official US Non-Farm Payroll results. The report was expected to show that the US economy added 158K new jobs in August, yet the data came in at 130,000.
The unemployment rate held steady around 3.7%, with only 3,000 new manufacturing jobs created. Meanwhile, average hourly earnings are seen rising by 0.3% on a monthly basis and by 3.1% when compared to a year earlier.
Price pressure is coming through in CPI the last two months with 0.1 in June to .3 in July – we know the Fed intends to shave interest rates over time, does this hurry things along? This will be followed by the Fed Chair Jerome Powell's scheduled speech later during the US session, which might influence the USD price and contribute towards producing some meaningful opportunities on the last day of the week.
The GBP/EUR exchange rate is today quoted at 1.1164, up 1.0% over the course of the past week. Over the course of the past month, the exchange rate is 4.0% higher, providing welcome relief to those looking to transfer money from Sterling into Euros. With the new levels of 1.1105 support and resistance at 1.1210.
The EUR/USD pair had good price moves on Thursday and was solely influenced by the US Dollar price dynamics. The pair initially built on this week's goodish rebound from 28-month lows and touched a one-week high level of 1.1085, just to reverse its course during the second half of the day amid a modest USD recovery.
News that the US-China trade negotiations will kick off again in October reduced demand for traditional safe-haven assets, which was evident from a sharp rise in the US Treasury bond yields and helped ease the recent bearish pressure surrounding the greenback.
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