USD - ADP Employment Change (August)
USD - Services PMI (August)
The suspicion may well have been that progress over Brexit talks was essentially all that could move Sterling and we saw this being played out very clearly during yesterday’s session. The significant overshoot in UK Services PMI failed to lend any support to the Pound, but unsubstantiated suggestions that an accommodative side deal surrounding Brexit plans was being struck between London and Berlin saw Sterling rally hard. It seems reasonable to expect that this theme will now dominate as the clock counts down on the UK trying to strike a deal with the remainder of the EU.
The day ahead is relatively quiet when it comes to macroeconomic data, although the ADP Payroll number for August is on the cards for release at 1.15pm BST. This is a day later than usual, accounting for the holiday observed by US markets at the start of the week. In a similar vein to what’s being seen in Europe, by all accounts it’s trade talks that have the bigger sway on the US dollar right now, although as with any key US macroeconomic print, there’s always going to be an awareness that any slowdown could serve to knock confidence over the timing of future rate hikes.
2.45pm BST will see the release of revised US Services PMI numbers for August. Again, this reading could provide some short-term direction for the US dollar, with the risk arguably being on the downside if we see a notable shortfall. That said, such an event would seem to be unlikely given the bullish data we’ve seen in recent days.
US-Canada trade talks continued into last night, with no breakthrough having been reported. Although Donald Trump’s stance is reportedly that the US has little to lose from the negotiations, market consensus suggests that failure to find common ground here could prove damaging for the US dollar and we’re already seeing a theme of weakness emerge here. That said, this would bolster US exporters and serve to further inflate the valuation of many US equities - at least in the short term, Donald Trump may have a point.
The Pound posted its first day of gains over the dollar in a week during yesterday’s session, but it’s difficult to see how this breaks the downward trend. GBP’s reliance on positive news over Brexit plans has been communicated very clearly once again so expect each communication here to increase volatility.
The Euro also managed to make progress against the US dollar during the session. With the common currency also standing to lose from a no-deal Brexit - although to a lesser extent than the Pound - expect further signs of progress in negotiations to at least help prevent further weakness being seen on the pair.
The Pound is struggling to break away from current levels against the Euro. Yesterday’s spike off the back of that supposed agreement between the UK and Germany proved very short lived, but it does show that there’s support available for Sterling if Brexit progress is being made.