Sterling fights back

GBP

Sterling is cautiously recovering some of the ground it lost last week to the dollar and overnight and has advanced slightly against the euro. Currently, sterling seems impervious to the continuing problems that Brexit is causing in Northern Ireland and ignored Sir David Frost’s threats to invoke article 16 made during his speech at the Conservative Party conference.

The conference continues today with several of the most senior members of the cabinet scheduled to speak, including health secretary Sajid Javid. It is a quiet day for data with only the Markit Services Purchasing Managers Index release to look forward to, which is expected to be unchanged from last month at 54.6.

EUR

After a good start to the week yesterday, the euro gradually gave back most of its gains on the dollar and is softer again this morning. As with the other G10 currencies, the euro is suffering from the general risk-off mood with worries about the cost and availability of energy.

A plethora of figures are released in Europe today, which should give the euro some fresh direction. The pick of the data is the Eurozone Producer Index which we will be watching to see if there is any pick up from last month in inflationary pressures. Markit is scheduled to release its PMIs for the region, with the Composite figures for both Germany and the Eurozone set to be the highlights.

USD

Risk sentiment weakened yesterday as Wall Street fell, and once more, investors sought the safe haven of the dollar. Adding to the dollar’s attraction was another move upwards in Treasury Bond yields and Oil prices. The prolonged delay in raising the debt ceiling is unnerving the markets, as are rising tensions with China as it sends aircraft into Taiwan’s airspace. Until these issues are resolved, the dollar will continue to find demand at the expense of sterling and the euro.

Later today, the Institute for Supply Management release their take on September’s Services PMI, which the market will study closely as it is a reliable indicator of the overall health of the US economy and employment. Markit will also release its PMI surveys this afternoon.