Jerome Powell, the Chair of the Federal Reserve, will testify in front of US politicians today. The underlying economy has shifted fundamentally over the last six months, and lawmakers will be keen to clarify whether the current slowdown is temporary. With the market now pricing in one Federal Reserve rate cut before the year is out, Powell will likely find himself pressed to add substance to the appearance of a decline in US growth. A cautious tone here could leave the US Dollar under fresh pressure.
The Pound pushed out to fresh highs for the month against the US Dollar in the wake of last night’s Brexit news. UK economic data is limited for the day ahead, although Bank of England (BoE) Governor Mark Carney is due to meet the Treasury Select Committee, so any comments over growth prospects could provide further direction for Sterling.
Despite the avoidance of a no-deal Brexit being positive for the Eurozone, last night’s news was insufficient to drive the Euro out the narrow range it has occupied against the US Dollar for the last week. With no EU economic news on the calendar for today, any direction is likely to come from across the Atlantic, where a pessimistic outlook from the Fed could send the pair higher.
Again, the Pound found support against the Euro off last night’s news of a possible Brexit delay, pushing the cross out to the top of the 22-month trading range. Sentiment over Brexit and the accompanying political risk will likely determine where the pair goes from here.