It was another historic day for the Pound yesterday as GBP/USD pushed past the post Brexit-lows to a level last seen in 1985. The drastic slide follows last weekend’s political announcements from Prime Minster Theresa May, who set a Brexit timeline for March/April next year to trigger Article 50, and signalled that there will be a “hard Brexit”. Yesterday the market also processed some senior figures released by the Tories which suggested that the administration would refuse to prioritise the UK financial sector in the upcoming Brexit negotiations.
Across the pond, the Greenback remains relatively strong after an improved manufacturing reading was published on Tuesday afternoon. We also had some hawkish statements from two FOMC officials yesterday; Federal Reserve Bank of Cleveland President, Loretta Mester (who voted in favour of a rate hike in September) and Federal Reserve Bank of Richmond, Jeffrey Lacker. Lacker urged the central bank to “boost rates to head off a likely pickup in inflation” whilst Mester said a November rate hike “remains compelling”. The probability of a Fed rate hike by December has risen to 61 percent.
The trio of UK PMI releases concludes today, with the largest component; Services PMI expected to fall back slightly from the strong reading in August. Between these three readings, we will have a good idea of how confidence is holding up in the UK economy. There will be similar data releases in Europe as Italy and Spain release their services PMI figures, and the Retail Sales readings for Europe as a whole is published. The focus will then shift to the employment situation in the US, with ADP Employment data as a precursor to Friday’s Non-Farm payrolls figure.