Forex news from the European morning session - 2 September 2019
Headlines:
- Brexit: Election talk this week building more momentum
- Corbyn: Labour will finalise plan to stop no-deal Brexit today
- UK August manufacturing PMI 47.4 vs 48.4 expected
- Germany's manufacturing PMI details don't make for pleasant reading
- SNB total sight deposits w.e. 30 August CHF 591.6 bn vs CHF 591.7 bn prior
- China: Creating conditions for talks with US should be the focus
- David Gauke: I don't know whether we will have a majority to block a no-deal Brexit
- What are markets pricing in ahead of the RBA tomorrow?
Markets:
- USD leads, GBP lags on the day
- European equities higher; E-minis down 0.2%
- Gold up 0.4% to $1,525.65
- WTI flat at $55.13
- Bitcoin up 2.2% to $9,839
With markets looking a bit subdued amid US and Canadian holidays later, the pound stole all the focus as it slid hard in the European morning amid political uncertainty in the UK.
There are plenty of rumours flying around on how rebel/opposition lawmakers plan to stop Boris Johnson with the notion of a general election gaining strong traction ahead of parliament reconvening tomorrow following the summer recess.
The chaotic nature of the situation is leaving a lot of potential imponderables on the table and that weighed on the pound this morning as cable fell from 1.2155 to a low of 1.2066 before recovering some ground to 1.2080-90 levels currently.
At this stage, we're either going to see a no-deal Brexit or a general election take place and I reckon both outcomes present their own negative connotations for the pound. Although, the latter may be less "toxic" depending on how things develop in Westminster.
Other major currencies were less active with the aussie and kiwi weighed lower amid a more subdued risk mood, despite European equities faring decently. Gold is maintaining gains as markets stay more cautious and that is weighing a little on risk currencies.
The dollar held steady throughout the session as it maintains mild gains against the likes of the euro and yen with EUR/USD even touching fresh lows for the year as the pair dropped from 1.1090 to 1.0958 before holding around 1.0970 levels currently.
Looking ahead, trading sentiment should be more tepid amid thin liquidity conditions so just be wary of minor flows here and there before markets "normalise" again tomorrow.
