RationalFX: Sterling fell against both the euro and dollar on Tuesday as ongoing Brexit uncertainty undermined the positive release of U.K. PMI’s.
Brexit tensions between the U.K. and EU have threatened to spill over in recent weeks with U.K. Brexit Minister David Frost threatening to trigger article 16 of the Withdrawal agreement – a move that has spooked investors into thinking a U.K.-EU trade war could be imminent.
Comments over the weekend from UK Brexit minister Frost and European Vice -President Marcos Sefcovic failed to quell investor concerns of a potential trade war with comments suggesting both sides remain deadlocked over the Northern Ireland protocol. Speaking earlier in the week, Frost said divergence from the EU rules is a “national necessity” whilst Sefcovic accused Frost of “political posturing” and bringing new problems to the table whilst the EU are “doing everything it can” to avoid suspending the Northern Ireland Protocol.
Despite the ongoing Brexit uncertainty, UK data continued to show a positive recovery yesterday as the UK’s November PMI’s beat market forecasts. According to the data released by the Office for National Statistics, Markit Manufacturing PMI grew by 58.2 against expectations of 57.3 whilst Markit Services PMI showed growth of 58.6 against expectations of 58.5.
The dollar continued to trade close to yearly highs against a basket of currencies yesterday as Global Covid uncertainty and news that Federal Reserve chair Jerome Powell would sit for another term has kept the dollar well bought.
News of Federal Reserve Chair Jerome Powell has been welcomed by dollar bulls as there is an expectation that the US will go ahead with normalising monetary policy by hiking the US interest rate twice before the end of the year.
Recent comments from the World Health Organisation that European Covid deaths could top two million in March and that the current Covid transmission rates in 53 European countries are of grave concern has also aided the safe-haven dollar in recent weeks.
14:30 – USD – Durable Goods Order expected 0.2%
14:30 – USD – Nondefense Capital Goods Orders Ex Aircraft (Oct) 0.6% expected
14:30 – USD – Gross Domestic Product Annualized (Q3) 2.1% expected
20:00 – USD – FOMC Minutes
Source : ETFWorld.co.uk