The pound is largely unchanged for the week as very little economic data of note has been released and the focus stays on Brexit. With an extension to the end of October agreed, all options remain possible. At this stage it seems clear that the market/investors are unclear of what will happen next.
Some think the pound will bounce on the extension as this gives the House of Commons more time to agree a deal. While others believe the uncertainty will leave the pound with very little upside potential. On potential outcomes, the probability of a general election is increasing daily. Should a general election be scheduled, our view is that the pound would slump in the short term as uncertainty increases.
On the euro front, the single currency is at a two and a half week high against the US Dollar. Significant demand for the Euro has been present as reports of a transaction of circa $6Bln circulate – for the purchase of a large aviation finance business from a German bank by a Japanese Bank.
The market has therefore ignored the recent poor economic data and investors bought euros in bulk.
The US dollar has been a mixed bag over the past few days and looks to end the week unchanged. The FED chair is rumoured to have made a statement behind closed doors, saying that interest rates are at the right level currently – any insight like this into rate outlooks will have an immediate impact on the dollar.
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