Sterling was stable today, with GBP/USD stuck around 1.30, after having fallen sharply yesterday following comments by Prime Minister Johnson hinting at troubles ahead for UK-EU trade negotiations. Johnson said that he would rather accept restricted trade between the UK and EU rather than comply with EU standards while EU officials reiterated that the end-year target date to complete transition negotiations remained very ambitious.
Markets had priced in a 20% probability of the Reserve Bank of Australia cutting rates 25bp at its policy meeting this morning and the Australian Dollar promptly rallied after the RBA left rates unchanged at 0.75%. The Kiwi Dollar joined the ride higher but currency gains have nevertheless been limited with the Australian Dollar trade-weighted index still within touching distance of a near 11-year low.
The EUR/USD cross has now been in a narrow 1% range of 1.10-1.11 for the past three weeks and it’s been a similar story for USD/CHF. Daily volatility in these European currencies remains very subdued despite China-related jitters in global markets.
