Political tensions in the UK have risen following the Supreme Court deeming Boris Johnson’s prorogue of Parliament to be unlawful. Parliament immediately returned to the House of Commons following this decision and begun putting pressure on the PM about this decision and Brexit in general.
The main risk right now to the Pound is if the Government strengthens its position to take the UK out of the EU on October 31st, even if it means a no-deal. The reality is that this would mean they would have to find a loophole in the Benn Act, which I’m sure could be done if needed- which has put pressure on Sterling.
Another risk is that there is the talk of a vote of no confidence this week which would see Jeremy Corbyn take over as caretaker PM and request an extension for the Brexit deadline- which would also weaken the Pound, the longer Brexit takes, the weaker the Pound gets (As we have seen).
The only positive scenarios I can see in October is that the UK Government manages to secure a deal with the EU by October 31st, which is still possible- I am sure we will begin to hear about Irish Backstop details soon, and if they are workable, we will see Sterling strengthen.
On the data front, the main releases for Sterling are PMI data this week.
Manufacturing PMI for September is expected to show a decline to 47.0 from 47.4 when it is released on Tuesday, at 9.30 am.
Services PMI for September is forecast to show a fall to 50.3 from 50.6 when it is released on Thursday, at 9.30 am
Construction PMI is estimated to show a decline to 44.9 from 45.0 when it is released on Wednesday, at 9.30 am.
A lower-than-expected result would put pressure on the Pound and vice versa for a higher result.
This is especially true following recent comments from Micheal Sauders, an official at the Bank of England (BOE), who stated the BOE may need to lower interest rates to help offset a slowdown in the economy.
This Friday we will also see the release of NFP data from the U.S expected to show a rise to 145k- as you may or may not know, NFP is notoriously unpredictable and rarely comes out as predicted, so please take caution if trading on Friday.
As Monday is the end of month and quarter we may see profit-taking across currency pairs and metals, so if you see drops in GBP, USD, Oil, Gold & Silver- you know why!