• UK data provides support
  • ECB member calls for end to QE
  • Tensions between Istanbul and Washington

Sterling gains on hopes of cabinet reshuffle

The pound performed well yesterday, gaining an average of 0.45% across the board on hopes that Theresa May would look to reshuffle her cabinet over the coming weeks. After the recent uncertainty surrounding the PM and the stability of her position, news that she could reshuffle the cabinet and remove any threats left investors more comfortable towards the pound. Of key interest will be the PM’s decision regarding Boris Johnson, who many feel has been the most Machiavellian.

Today we have had the release of manufacturing and industrial output, which painted a mixed picture. While manufacturing fell from prior, industrial output rose by 1.2%, which has boosted the currency.

Euro gains on positive ECB comments

The euro posted a mixed performance on Monday, gaining marginally against the dollar but losing close to half a percent against the pound. This relatively poor performance comes despite a significantly better than expected German industrial orders number, which beat expectations by 1.9%. The euro’s poor performance against the pound came largely as a result of sterling strength rather than euro weakness.

The single currency has made strong gains against the dollar this morning after ECB member Lautenschlaeger called for the central bank to roll back asset purchasing in 2018.

This morning we have had the release of German trade balance data combined with French industrial output. While German trade balance rose, euro gains were likely capped as French industrial output fell significantly more than expected, down 0.8% to -0.3%.

Dollar changeable ahead of quiet day

The dollar followed a similar trend to the euro yesterday, losing nearly half a percent against the pound but trading relatively flat against the euro. A lack of economic data releases kept focus on the employment numbers from last week, combined with the tensions between Istanbul and Washington.

The only data release expected today is US Redbook data at 13:55. While this is unlikely to have a notable impact on the currency, a significant change could see an impact on the dollar if it is large enough to affect the likelihood of a rate hike in the US.

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