Financial market research and analysis

The pound has had a disappointing start to the week, selling off versus both the euro and the dollar as Brexit pressure picks up on Theresa May and following the slowest pace of growth in UK manufacturing in just over 2 years. Traders will now look towards the Construction PMI, which is forecast to have eased back from July’s expansion of 55.4, the fastest rate of expansion in 14 months to 54.8 in August. A stronger than forecast print could lift the battered pound, the release will also bring house builders firmly into view ahead of a busy week of reporting for the sector will Redrow releasing its prelims today and Barratt Development and Bovis Homes reporting later in the week.

Mark Carney & Co. Before the Treasury Select Committee

Pound traders will also be watching BoE Governor Mark Carney as he takes the hot seat in front of the House of Commons Treasury Committee. MP’s are expected to question Carney over his future at the helm of the BoE amid growing speculation that the BoE Governor could extend his stay in order to help guide the British economy through Brexit. Whilst the meeting tomorrow is technically to discuss monetary policy and the raising of interest rates last month, it I highly likely that an MP will question Carney over his future. Carney is due to leave March next year, just months after Brexit. Keeping Mark Carney would inevitably help smooth the departure of the UK from the EU. Mark Carney has done a good job in very challenging circumstances, keeping him on as the economic landscape could potentially become increasing more challenging makes perfect sense.

That said, Downing Street has shut down any such rumours of Carney staying by advising that he is still leaving as planned in June 2019. Should we get any hints that Carney is seriously considering staying beyond the planned six years, the pound could get a decent boost. The market knows Carney and trusts him and in the eyes of the pound adjusting to a new BoE Governor during a potentially very difficult post Brexit period, is an added uncertainty which it would rather not deal with.

European Futures Point to Softer Start

The significantly weaker pound boosted the FTSE in the previous session, lifting it notably above its peers on mainland Europe. However, the UK index has been unable to hold onto that momentum. European futures are pointing to a marginally lower start on the open following on from an Asian session which lacked direction due to an absence of cues thanks to the US public holiday.

In the forex space emerging markets remain a hot topic as the dollar inched higher overnight raising fears over the outlook for currencies such as the Argentine peso and Turkish Lira.

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