Prime Minister Johnson told the Cabinet that he believed that there is a Brexit deal to be done.

Oil prices dipped sharply after reports that Saudi Arabian output would be restored more quickly than expected, although uncertainty was still a key element.

There was notable market restraint ahead of the Federal Reserve policy decision. Overall risk appetite held steady, although equity markets were mixed while US bond yields drifted lower.

The dollar lost ground as the Fed boosted liquidity to pull overnight rates lower. The yen and Swiss franc retreated amid weaker defensive demand with both central banks announcing policy decisions on Thursday.

Precious metals drifted lower amid a dip in demand for defensive assets. Sterling held firm with GBP/USD hitting fresh 6-week highs before a correction.

Commodity currencies were unable to make headway as oil prices declined.

Markets were braced for Wednesday’s Federal Reserve policy statement with strong expectations of a 0.25% rate cut to 2.00%. The statement together with updated interest rate forecasts from individual FOMC members and Powell’s rhetoric will be crucial for dollar direction. A lack of dovish rhetoric would tend to boost the dollar, although there would be strong criticism from the Administration and the dollar traded marginally stronger in early Europe with EUR/USD near 1.1065 and sharp moves inevitable later.

According to sources, Prime Minister Johnson told the Cabinet that he believed that there is a Brexit deal to be done and he had agreed with Chancellor Merkel that talks needed to be accelerated. The UK Supreme Court began hearing cases calling for parliament’s prorogation to be ruled as unlawful with a decision likely on Thursday.

The UK currency was boosted by a firmer tone surrounding global risk appetite and GBP/EUR held close to 1.1270 against a firm euro while GBP/USD pushed to 6-week highs above 1.2500. There was a slight correction on Wednesday before the latest UK inflation report as resistance levels held firm and there was also an element of caution ahead of Thursday’s Bank of England policy meeting with short-term yield spreads providing an element of Sterling support.

Economic Calendar

09:30GBP Core CPI (Y/Y)(AUG)1.80%1.90%
09:30GBP CPI (M/M)(AUG)-0.10%0.00%
09:30GBP CPI (Y/Y)(AUG)1.90%2.10%
09:30GBP PPI Core Output (Y/Y)(AUG)1.72
09:30GBP PPI Output (Y/Y)(AUG)-1.80%
09:30GBP PPI Input (Y/Y)(AUG)0.10%1.30%
09:30GBP PPI Input (M/M)(AUG)0.50%0.90%
10:00Euro-Zone Core CPI (Y/Y)(AUG 01)-0.90%
10:00Euro-Zone CPI (Y/Y)(AUG)1.10%1.10%
10:00Euro-Zone CPI (M/M)(AUG)-0.40%-0.50%
13:30USD Building Permits(AUG)1.270K1.317K
13:30USD Building Permits (M/M)(AUG)-6.90%
13:30USD Housing Starts(AUG)-1.191M
13:30USD Housing Starts (M/M)(AUG)--4.00%
13:30Bank of Canada Core CPI (Y/Y)(AUG)-2.00%
13:30Bank of Canada Core CPI (M/M)(AUG)-0.30%
13:30CAD CPI (Y/Y)(AUG)1.70%2.00%
13:30CAD CPI (M/M)(AUG)0.20%0.50%
19:00USD FOMC Statement--
19:00USD FOMC Projections of Economy--
19:00FOMC Interest Rate Decision-2.25%
23:45NZD GDP (Y/Y)2.40%2.50%
23:45NZD GDP (Q/Q)0.60%0.60%

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.