The pound tumbled on Tuesday against the dollar and euro following mounting pressure after poor data released in the morning set the tone for the session. Sterling fell through 1.14 against the single currency immediately after the UK Services PMI was announced and continued to slump over the course of the day, eventually settling in the mid 1.13’s. It was the same story versus the dollar with cable passing below the 1.30 level, heading close to 1.29 before the pound regained some composure and began to claw back the losses.
Currency markets took President Donald Trump’s State of the Union address in their stride, with more focus being paid to the near-term outlook on monetary policy from central banks. Both the Fed and the ECB have reigned in their optimism in recent weeks with the European Central Bank expressing caution after data from the region over the last few months has been below par.
Despite the pound beginning to reverse its poor fortunes from yesterday, the uncertainty surrounding the UK’s future outside the bloc still looks set to trouble the home currency. A recent poll suggested that a disorderly Brexit could see a 5-10% slide for the pound with the upside after leaving with a deal capped at around half that.
Today’s key events
There is little to focus on this morning from Europe and the UK, with the only release of note being German Factory orders that arrived below expectations earlier today after weaker demand from abroad.
This afternoon, Canada and the States will share the limelight, with a speech from Governing Council member Timothy Lane from Canada and Trade balance and oil inventory figures from the US.
New Zealand will release its latest employment change figures and unemployment rate before attention flies back to the US for a speech from FOMC member, Quarles.