Sterling is back near its weekly lows against the US dollar this morning, after having its brief post-Boris rally cut short last night when a phone call between Boris Johnson and European Commission President Jean-Claude Juncker end about as well as could be expected. Johnson reportedly requested that the Withdrawal Agreement negotiated by his predecessor be renegotiated, and Juncker declined. All things considered, sterling’s reaction yesterday was fairly mild – the outcome of the phone call was entirely consistent with previous public commitments from both Johnson and EU leaders. Earlier in the day, Johnson appeared in Parliament for an impromptu Prime Minister’s questions where he once again reiterated that his intent was to leave by October 31st, and that the current Withdrawal Agreement was unacceptable. A period of bluff and posturing now awaits; based off sterling’s price action this week, one could argue that the bar for a rally may be set quite low as everything other than a firm turn towards no deal appears to already be in the price. Yesterday’s sole data release of note was the Confederation of British Industry’s Realised Sales Index, which remained in contractionary territory for July.


The euro and Mario Draghi took FX punters for a ride yesterday, as the European Central Bank sent an unambiguous dovish policy signal in yesterday’s policy statement and press conference, but the single currency strengthened. Pundits quickly began fitting a narrative to the euro rally; with one credible explanation being that the fact that the Governing Council had not been “unanimous” about further easing represented an upside surprise relative to market expectations. In reality, yesterday was an unrelentingly dovish performance from the ECB and Draghi. The statement changed forward guidance to be more dovish and included nods to tiered deposit rates and new asset purchases, while also explicitly acknowledging “symmetry” in the ECB’s inflation target. Hours after the puzzling euro rally, the single currency duly retreated back to where it was earlier in the day. Earlier in the day, the widely followed IFO German Business Climate survey printed at a dismal 95.7, the lowest reading since 2013, underlining the case for further easing from the ECB.


With momentous monetary and political developments affecting sterling and EUR yesterday, the dollar was somewhat out of the spotlight, but did manage to post solid gains versus the entire G10 basket of currencies. Durable Goods orders data for June came out well above expectations, with headline orders rising 2% on the month, and the less volatile ex transportation category still rising a powerful 1.2%. Weekly Unemployment Claims were just 206,000 – apart from a similar series of low readings around March of this year, this was the lowest claims figure since the 1960s. Neither of these data points scream “rate cuts”, and yet that is what the Federal Open Markets Committee is expected to do when it meets next week. Today at 13:30 BST, the first look at Gross Domestic Product growth in the second quarter will be released.


After resisting further weakness against the US dollar for all of Wednesday and most of yesterday, the loonie slipped to fresh lows for the month last night. No loonie data was released and news flow was thin. No major released are scheduled today.