Pound under pressure as deal becomes 'overwhelmingly unlikely'

• Dollar loses ground on the ongoing US-China trade war

• Australian Dollar dips on poor consumer confidence data

The Pound fell yet again yesterday as it was reported that talks between the UK and the EU were close to breaking down. UK Prime Minister Boris Johnson and German Chancellor Angela Merkel discussed the UK’s latest proposal over the phone and Downing Street leaked that Mrs Merkel had stated that a deal was “overwhelmingly unlikely”. Markets are beginning to reprice the risk of a no-deal Brexit as both sides attempt to pin any blame on each other. Sources close to Mrs Merkel doubt that she would have sued such language with Donald Tusk tweeting that the UK didn’t want a deal or an extension. With both sides looking unwilling to compromise the stakes are incredibly high with time running out. The chances of no-deal are rising by the day and the Pound will remain under pressure in the short term.

Dollar loses ground on the ongoing US-China trade war

Markets continue to remain concerned about an escalation in the US-China trade war. Talks are due at the end of the week as it is becoming clear that the ongoing uncertainty is beginning to affect the US economy negatively. Recent data has been poor and the Federal Reserve has already cut rates a couple of times this year. The chances of a third rate cut are increasing and the dollar may continue to lose ground in the wake of continued weaker data. Fed minutes released later this evening will be closely watched.

Australian Dollar dips on poor consumer confidence data

Overnight the Australian dollar weakened as it was reported that consumer confidence came in at the lowest level in more than years.  The index of consumer sentiment fell to 92.8 in October from 98.2 in September. This came despite recent rate cuts from the Reserve bank of Australia. Rate cuts generally boost consumer confidence due to the extra disposable income and expectations for future earnings.  With confidence ebbing and economic data deteriorating the RBA may have to start thinking outside the box to revive the flagging economy.