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Brexit headlines continue to plague the Pound; Jackson Hole in the limelight

Today’s macro highlights:

  • EUR – German GDP (second print of Q2)

  • USD – US durable goods orders (July)

  • USD – Jackson Hole Symposium

The Pound was once again in the firing line of nervous investors, who were faced with a reality check as the government released key advisory documents to businesses, public bodies and members of the public as to how to prepare for a no-deal Brexit. The gist of these was to highlight the cost associated with a no-deal Brexit.

The Euro, meanwhile, appeared to shrug off the release of the European Central Bank’s (ECB) account of its July monetary policy meeting. The minutes suggest the authorities will stay on their current path, winding down the quantitative easing programme as planned. Reportedly, members were broadly in agreement that the inflation environment is improving. That said, Bundesbank President Jens Weidmann (widely seen as Mario Draghi’s successor next year) cautioned that the current monetary policy stance is at odds with a strengthening economy, striking a slightly less-dovish tone.  

The Dollar gained as US-China trade talk ended with no progress having been made and amid rising optimism about the Jackson Hole Economic Policy Symposium. Reciprocal tariffs by the Chinese following the US duties that came into effect yesterday also helped the safe haven. Not even disappointing purchasing managers’ indices could hamper the Greenback’s rise. The readings show that the uncertainty created by ongoing trade tensions is having an impact on business activity. In particular, the steel tariffs imposed on various countries are translating into higher input costs for many in the private sector.

Looking ahead, out of Europe and the UK, there’s German GDP out at 07.00 BST and UK BBA mortgage approvals at 09.30 BST. Neither are expected to move the needle on the respective currencies. German GDP would have to be significantly out of sync with the preliminary readings (0.5% q/q and 2.3% y/y), while Brexit-related headlines will almost certainly overshadow the UK housing market data. In the US, durable goods orders are out at 13.30 BST. They are expected to have declined. Again, it would have to be a significant divergence from forecasts to worry the advancing Greenback. The most closely watched release of the day will be Powell’s much-anticipated Jackson Hole address at 15.00 BST. Investors will be looking for further hints on the timing of the next interest rate hike, which consensus believes will be in September. We could also gain further insight into the central bank’s view of the impact of trade wars on the economy and what this may mean for monetary policy going forward.  


Cable struggled yesterday amid renewed Brexit fears and Dollar strength although some recovery was seen in early morning trade.  With a UK holiday coming up on Monday, we are likely to see ongoing volatility given limited trading volumes. Furthermore, Dollar strength is likely to persist on the back of optimism about the prospect for interest rate hikes and as global geopolitical uncertainty prompts a flight to safety.


The EUR/USD retraced the last few days’ gains, despite some less-dovish rhetoric from the ECB, possibly undermined by the strength of the Dollar ahead of the Jackson Hole Symposium. It could be a tough day for the pair if markets interpret Powell’s address as confirmatory of a fourth rate hike this year.


The cross once again traded lower on the day. There may be some volatility ahead given Monday’s holiday in the UK but as investors digest the possibility of a hard Brexit, we’ll see the cross continue to come under pressure.