Infinity Insights

Today's exchange rate news

Sterling’s recovery continues as Jo Johnson resigns

6th September 2019

The Pound’s recovery continued yesterday as PM Johnson’s younger brother resigned from the cabinet and the party, stating that he is "torn between family loyalty and the national interest". The BBC’s political editor cited that Jo Johnson was "understood to be upset about the purge of colleagues" that were sacked earlier in the week and he and the PM are "in very different places" on Brexit. Sterling’s recovery has continued since Tuesday as the prospect of a “no deal” Brexit dwindled, although leading banks are still pricing the prospect at 40%. Jo Johnson’s resignation has only added to the chaos that PM Johnson needs to manage and only highlights the divided opinion amongst the Conservative party.

The House of Lords continues to debate and vote on a bill to prevent no-deal this afternoon. Leader of the House, Jacob Rees-Mogg confirmed that Parliament would stay open next week to finish dealing with the bill. It is expected that PM Johnson will raise a motion for a general election under the fixed term parliaments act. According to official government figures, nearly 200,000 people have applied to register to vote in just 72 hours. It has also been stated that more than half of them are under 35.

In terms of data, the market was focused on the US ADP employment report ahead of today’s all-important US employment report. The headline figure was positive beating expectation with a solid reading of 195k against 148K, the biggest reading in four months. In addition, the US ISM non-manufacturing sector grew in August for the 115th consecutive month. The reading showed that growth in the non-manufacturing sector grew at a faster rate than previously.

Looking to the day ahead, the wider market will be focused on the US labour market report, typically seen as the key bellwether of US economic conditions. Yesterday’s ADP report posted some promising figures, suggesting a positive reading is possible. The consensus is employment growing by 185k and the unemployment rate falling back to its 3.6% cyclical low. The market will pay particular focus on this number due to rate cutting cycle the US is embarking on, a better number could tapper this but unlikely to change the view for this month.

In addition, the Bill to extend the 31 October Brexit deadline will be voted on in the House of Lords today. According to media reports it is almost certain to pass and so it will then return to the House of Commons for a final vote on Monday. Speculation continues to grow regarding a general election.

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