What’s been happening?

Pound Sterling – UK Markets 

The British pound suffered heavy losses against the dollar and fell to its lowest level in more than two years on Monday while dropping to its weakest level since early January vs the euro as no-deal Brexit fears continued to weigh on the currency.

Following Cabinet Office Minister comments on Sunday about no-deal being a very real prospect, British Foreign Secretary Dominic Raab said that they are ‘turbo-charging’ no-deal Brexit preparations and announced that there will be a government committee monitoring the developments daily. Regarding the possibility of Parliament attempting to block a no-deal Brexit, Conservative lawmaker Letwin argued that parliament may not be able to stop it and said that they may have to accept the fact that they may end up crashing out of the EU.

Additionally, speaking to reporters on Monday, British Prime Minister Boris Johnson’s spokeswoman said that they were hoping the EU to change their mind about reopening the Withdrawal Agreement. “While there is no change on the Withdrawal Agreement we must assume there will be a no-deal, the government’s central focus is preparing for that," she stated. Although PM Johnson adopted a softer tone later in the day, he failed to help the sterling recover its losses. "There is a big incentive to get this thing done," Johnson said. "There is every chance we can get a deal. With common sense, we will get a deal," he added while repeating that they need a new free trade deal with the EU.  

US Dollar – US Markets

Ahead of the FOMC announcements on Wednesday, the US Dollar Index preserved its bullish momentum and built on Friday’s gains that it recorded on the back of the GDP data, which showed that the economic activity expanded by 2.1% on a yearly basis in the second quarter to beat analysts’ estimate of 1.8%. 

The only data from the US on Monday showed that the manufacturing sector in Texas recovered in July with the Dallas Fed Manufacturing Index improving to -6.3 from -12.1 in June. In the meantime, US President Donald Trump, once again, attacked the Fed in a series of tweets. “The Fed “raised” way too early and way too much. Their quantitative tightening was another big mistake,” Trump said. "We are competing with other countries that know how to play the game against the US. That’s actually why the EU was formed. And for China, until now, the US has been “easy pickings.” The Fed has made all of the wrong moves. A small rate cut is not enough, but we will win anyway!"  

Euro – European Markets

The shared currency found demand on Monday with investors moving away from the pound sterling and finished the day higher against the dollar as well. The data from Italy showed that the Producer Price Index declined 0.3% on a monthly basis in June but didn’t have a negative impact on the euro’s market valuation. Other data revealed that retail sales in Spain rose 2.4% on a yearly basis in June to bear the analysts’ estimate of 1.7%.  

What’s coming up? 

UK: There won’t be any macroeconomic data releases from the UK on Tuesday and investors will remain focused on the political headlines.

US: The US economic docket will feature the Bureau of Economic Analysis Personal Consumption Expenditure Price Index data, the Federal Reserve’s preferred gauge of inflation. The Conference Board’s Consumer Confidence Index and Pending Home Sales will be published on Tuesday as well. 

EU: The European Commission will release its latest Business and Consumer Survey, which will include the Consumer Confidence, Business Climate, Services Sentiment, Economic Sentiment Indicator and Industrial Confidence figures. Furthermore, Germany’s Destatit will publish the preliminary inflation data for July.