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POUND STERLING (GBP)
UK services-sector data suggested activity stalled in November as uncertainty hurt sentiment. Data releases continued to have little overall impact as Brexit drama continuing to dominate with no evidence of a political resolution. Speculation and rumours continued to dominate and contributed to further volatility with the chances of no Brexit at all seen to have increased while the government was no nearer to securing support for its agreement. GBP/USD dipped towards 1.2700 as dollar gains and renewed declines in equity markets damaged support while GBP/EUR retreated from 1.1250 highs.
Source reports on Wednesday indicated that the ECB was debating ideas for a gradual tightening of monetary policy during 2019. Any increase in interest rates was, however, expected to be extremely cautious and the Euro was unable to secure significant support. EUR/USD was held below 1.1350 despite some positive rhetoric surrounding the 2019 Italian budget from Prime Minister Conte. Global risk conditions remained important on Thursday with EUR/USD drifting lower to 1.1325 as contradictory Italian rhetoric undermined confidence while there was a mixed tone on the major crosses.
Dollar activity was limited by Wednesday’s US market holiday. There was further uncertainty surrounding US-China trade policies with markets unconvinced over US intent following mixed rhetoric from US President Trump. Caution was also inevitable after Tuesday’s sharp reversal in equity markets. The Federal Reserve economic survey hinted at a slowdown in activity, although wage pressures were higher. The arrest of Hauwei’s chief financial officer triggered a fresh slide in equity markets and net global dollar gains and USD/JPY found support below 113.00 after encouraging Chinese rhetoric.
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