20/09/2017 - Boris Johnson Threatens to Quit Post

GBP

Sterling painted a mixed picture yesterday following a report that Foreign Minister Boris Johnson could resign as early as Friday if his demands over Brexit were not met. Johnson later denied the claim which saw the pound ease back up with the assistance of weaker than expected data from the U.S.

The report which came two days prior to Prime Minister Theresa May’s speech in Italy on Brexit - said close friends of Johnson believed he would be left with no choice but to quit if May favours paying for access to the European Union’s single market on a perpetual basis. Since the report’s release, many investors have argued that Johnson’s resignation would free May’s hand in pushing through a softer Brexit which would be positive for sterling.

However when questioned about the report, the former London mayor said he has no plans to give up his current position and reiterated that the government was “working together” and that it would “deliver a fantastic Brexit”. May later backed Johnson’s comments saying that he was “doing good work” and should not be sacked.

USD

The dollar sold off   yesterday as investors geared up for the Feds policy meeting set to begin later today. With U.S. interest rates widely set to remain unchanged, markets are still expecting the Fed to hint at when it plans to start unwinding the $4.5 trillion dollar which it accumulated in the aftermath of the financial crisis.

Investors were also keeping close tabs on housing market data which was released later in the day. Data released yesterday showed that the annual number of new residential building permits issued during the previous month increased from 1.23M to 1.30M which provided some support to the dollar.  These gains were somewhat offset by an unexpected fall in the number of housing starts for the month of August from 1.19M to 1.18M. Separate reports also revealed that U.S. import prices also rose by their fastest in seven months while the trade deficit widened by more than expected in the second quarter.

Key Announcements

09:30 - GBP: Retail sales (Aug) forecast to fall to 0.2% from 0.3%

19:00 - USD: FOMC Federal funds rate expected to remain unchanged at 1.25%

19:00 - USD: FOMC  Economic Predictions

19:00 - USD: FOMC Press Conference