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FX Update

British pound drops to new lows after UK economy contracted in Q2


Financial markets have seen great volatility this week, and today is no exception. The UK pound plunged to new multiyear lows after data showed that the UK economy unexpectedly contracted in the second quarter and PM Boris Johnson’s announced plans for a general election shortly after the October 31 Brexit deadline. The PBOC set the USD/CNY fixing slightly higher. Global stocks are soft.

“Peace is not the absence of conflict, but the ability to cope with it.”
Dorothy Thomas, American human rights activist
  • FX Rates
    August 9, 2019

    Rates are not real time. Rates are today's indicative mid-market rates as of time of publishing, which may vary. Please contact SVB for a current quote.

  • USD

    The dollar had a mixed performance overnight, making gains against the UK pound, Canadian dollar and Chinese yuan, and losing ground against the euro, Japanese yen and Australian dollar. Core US PPI in July surprised by posting its first fall in two years. Excluding food and energy, producer prices fell 0.1% from June compared to expectations for a 0.1% gain. The 2.1% annual increase was the slowest in two years.


    The UK pound dropped to its lowest level in two years following news that the UK economy unexpectedly contracted in Q2 - fueling fears that the economy is heading for its first recession in a decade. New Prime Minister Boris Johnson continues to pledge that Britain will leave the EU on October 31, and stated today that he wants to hold a general election shortly after that date should a no-confidence vote succeed.


    Italy’s coalition government looks destined to fall. Deputy PM Salvani has called for a snap election, disparaging his ruling partners in government and saying that the coalition no longer holds a majority in parliament. Italian bonds were sold, pushing yields higher by 14 bps to 1.68%. The euro initially dropped on the news, but quickly rallied and ended up slightly in the European trading session.


    The Canadian dollar fell against the dollar despite higher oil prices. It weakened after release of July labor data which showed a loss of 24,200 jobs, raising the unemployment rate to 5.7%.


    The PBOC set the USD/CNY reference rate at 7.0136, slightly higher for a second day in a row. The current spot rate is trading near 7.0575, or about 0.6% weaker than the fixing, but well within the 2% daily trading band.

    The Australian dollar edged back over $0.6800, well above Tuesday’s 10-year low at $0.6756.The Reserve Bank of Australian’s Governor Philip Lowe spoke about pursuing wide-ranging productivity reforms. He put pressure on the government to invest more in quality infrastructure and to enact reforms which will protect their country from political shocks overseas.

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About the Author

Scott Petruska is Chief Currency Strategist and senior advisor for Silicon Valley Bank’s global financial services group, and is based in Boston, MA. He advises clients on currency and interest rate hedging strategies, and helps them with other aspects of global banking. He regularly writes blogs on topics covering the global financial markets, conducts client seminars and webinars, and speaks at regional financial conferences.

Petruska has more than 30 years experience in the currency and interest rate markets, and has lived and worked in Boston, Chicago, New York City, Singapore and Tokyo. Prior to joining SVB in 2009, he worked at several large international financial institutions, including National Westminster Bank, Irving Trust, Bank of New York, State Street Bank and Commerce Bank. He has been an institutional trader, product developer, analyst, salesperson and advisor.

Petruska has been awarded several professional designations, including the CFA (Chartered Financial Analyst), FRM (Financial Risk Manager) and CMT (Certified Market Technician). He earned his undergraduate degree in Finance & Banking from the University of Wisconsin.

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