Sterling, which pushed higher following the release of better-than-expected July GDP data on Monday morning, has been range-bound for the past 48 hours. Sterling showed little reaction yesterday to another strong set of UK labour market data, with weekly earnings growth rising to 4% yoy and above 2% yoy in July for the first time in four years.
If anything, the GBP/USD cross has edged a little lower this afternoon to around 1.233, despite news that the Scottish Court of Session had ruled that Prime Minister Johnson’s suspension of parliament was illegal. The Supreme Court will now rule on the matter on Tuesday, with constitutional experts of the view that the highest court in the land will overturn the Scottish Court of Session’s ruling. In any case, this does not fundamentally change the thrust of the Brexit debate, with the lingering uncertainty of whether the UK will leave the EU on 31st October and who will be in power by end-year seemingly capping Sterling’s upside at these levels.
The Euro has depreciated to the weak end of a narrow 1.4% range in place since early August and EUR/USD temporarily fell below 1.10 ahead of tomorrow’s all important European Central Bank meeting. President Draghi is expected to announce monetary policy easing measures, which could include policy rate cuts (of 10-20bps according to analysts), a resumption of QE, a tiering of deposits for banks, another LTRO program, the introduction of an asymmetric inflation target and a commitment to keeping rates low for longer. The concern is seemingly that the ECB will once again underwhelm
markets and that its measures will fail to reflate the Eurozone.
