05/09/2017 - Pound Slips As Investors Buy Safe Havens

GBP

Sterling slipped half a percent against the euro on Monday, with the single currency rallying broadly as worries over North Korea drove a move away from riskier assets, and as domestic political uncertainty kept the battered pound under pressure.

Data showing growth in Britain’s construction sector hit a one-year low in August - hurt by an investment slump in the commercial sector as Brexit uncertainty weighed - had little effect on the currency. Analysts said Tuesday’s data from the dominant services sector would be more important.

Data on Friday showed speculators added to their bets against the pound in the week up to last Tuesday, on the back of weak data as well as uncertainty about Britain’s departure from the European Union.

Prime Minister Theresa May warned lawmakers over the weekend that Britain could be faced with a Brexit “cliff edge” if they failed to back her EU repeal bill, which is to be debated in parliament on Thursday.

EUR

The euro hung on to most of its recent gains on Monday while the dollar struggled against a broad swathe of currencies and its trade-weighted basket approached a 2-1/2 year low.

The euro’s price action on Monday was all the more surprising given the overhang of long bets on the single currency that have grown rapidly this year and before the European Central Bank policy meeting this week.

That rise has come at a time when expectations of the ECB announcing a timeline for a withdrawal of its bond purchase plans have reduced sharply in three weeks to less than a fifth from over half of the total number of analysts. 

In its last statement in July, the currency had a low number of mentions of 9 times, they said. However, price action was subsiding after the morning flurry as Wall Street traders do not return from the Labor Day holiday until Tuesday in a week filled with central bank meetings that are expected to dominate market attention.

Key Announcements

09.30 – GBP – Services PMI; Forecast at 53.5 against previous of 53.8