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FX round-up: Cable dips alongside US dollar

By Alexander Bueso

Date: Monday 24 Jun 2019

FX round-up: Cable dips alongside US dollar

(Sharecast News) - Sterling was on the back foot at the start of the week, with all eyes on whether the front-runner to become the next Prime Minister, Boris Johnson, would participate would join a planned debate on Sky on Tuesday.
In the background meanwhile, Labour leader Jeremy Corbyn appeared to show increasing support for a second referendum even as pro-EU MP Ken Clarke said he would be willing to vote in favour of bringing down the new government through a no-confidence vote.

"GBP/USD slipped as traders are still a little nervous due to the lack of political clarity in relation to Brexit," said David Madden at CMC Markets UK.

"Boris Johnson is still in the lead over Jeremey Hunt in the leadership race for the Conservative Party. The EY ITEM Club predicts that UK consumer spending in 2019 will grow at its slowest pace in six years, and the report is hanging over the pound too."

Against that backdrop, as of 1914 BST, cable was drifting lower by 0.04% to 1.27390 and by 0.26% versus the single currency.

In parallel, the US dollar spot index was down by 0.20% to 96.0290.

Commenting on the chances for further weakness in the US dollar, analysts at Jefferies said: "The dollar's strength was a symptom of investor fears over the US-China trade dispute, an imminent US recession and weaker economic data.

"The reality is that central bankers are reluctant to allow their real interest rates to move above zero for fear of undermining asset prices as well as inadvertently strengthening their currencies."

Speaking on the ingoing preparations for a meeting between US President Donald Trump and his Chinese counterpart on the sidelines of the G20 summit on 28-29 June, on Monday morning Chinese vice commerce minsietr, Wang Shouwen, said: "Compromise will be on both sides. It will be a two-way street."

Just three days before, the US Commerce Department had blacklisted a further five Chinese technology companies and reports indicated that Trump was under pressure not to compromise on national security, and more specifically on Huawei, in order to clinch a deal.

Dollar/yen was flat at 107.31 and euro/dollar up by 0.2% to 1.3924, helped by a slightly stronger reading on a key gauge of German business confidence.

The IFO institute's business confidence index retreated from a reading of 97.9 in May to 97.4 for May (consensus: 97.3).

Nevertheless, commenting on the data, Pantheon Macroeconomics's Claus Vistesen said: "The IFO has shown modest signs of recovery since February, but this rebound is thoroughly cancelled-out by today's report. The expectations index slipped to a four-month low of 94.2, from a revised 95.2 in May, reversing the modest rise since the start of the year.

"[...] The details were overall poor too. The manufacturing sentiment index slid further, to 1.5 from 3.9 in May, and sentiment in services and construction slipped as well."

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