Sterling
The Pound staged a minor recovery yesterday morning in response to UK Prime Minister Theresa May’s concession to accept a motion proposed by the opposition Labour Party for a ‘full and transparent debate’ in parliament on Britain’s post-‘Brexit’ future.
However, Sterling’s losses began to reverse by the end of the day in response to remarks from ‘Brexit’ Secretary David Davis pouring cold water on hopes that the UK could potentially retain access to the single market following a parliamentary debate. Davis asserted that ultimately it was the government that would decide when to trigger Article 50 and how the future trade agreements would be made. The Pound’s trade-weighted index remained above the all-time record low that it hit earlier in the week, but analysts are continuing to forecast further Sterling declines.
Euro
The Pound to Euro exchange rate ticked higher by around a cent yesterday as traders reacted to Theresa May’s announcement that she would be aiming for ‘maximum possible access’ to Europe’s single market. However, May’s encouraging remarks, and confidence in the Pound, were undermined later on in the day when ‘Brexit’ Secretary David Davis suggested that parliament would not actually have the ability to contest the government’s apparent plans for a so-called ‘hard Brexit’ outside of the single market.
The outlook for Sterling versus the single currency looks fairly gloomy, especially considering the emergence of rumours that the European Central Bank is considering tapering its quantitative easing scheme. For a long while it was taken as a given that the ECB would maintain its ultra-loose policy for many years but issues of bank profitability in the current low-interest environment mean that the bank could look to normalise monetary policy, and subsequently bolster the appeal of the Euro, sooner-than-anticipated.
US Dollar
‘Cable’ rose by just over a cent yesterday but Sterling could easily give back those gains fairly swiftly. The UK government’s one-day U-turn on the possibility of debating Britain’s ‘Brexit’ stance in parliament means that there is very little for holders of Sterling to be optimistic about. Indeed, Goldman Sachs is now predicting that GBP/USD will slide another -7% over the next year.
The US Dollar, meanwhile, was boosted slightly by the latest Federal Reserve minutes report, which showed that September’s decision to leave rates on hold was a ‘close call’. The upbeat central bank statement suggests that most, but not all, policymakers were prepared to vote for higher rates in the foreseeable future.
Canadian Dollar
Crude oil prices retreated yesterday as investors continued to express doubts over Russia’s commitment to coordinating with OPEC to curb oil production. GBP/CAD strengthened by over a cent on the day but there is every chance that the Pound will forfeit these gains over the coming days and weeks as negative ‘hard Brexit’ sentiment swells.
Australian Dollar
The Sterling to Australian Dollar exchange rate increased in value for a rare day of gains yesterday as hopes of a ‘softer Brexit’ gave the Pound the impetus to rally. However, hopes of anything other than a ‘hard Brexit’ were seemingly quashed later on in the day by tough comments from ‘Brexit’ Secretary David Davis.
New Zealand Dollar
Sterling managed to rally by around a cent against the New Zealand Dollar yesterday but GBP/NZD remains close to all-time lows and could begin to slide back to those levels if investor sentiment towards the Pound continues to worsen.
Data Released
13:30 USD Initial Jobless Claims (OCT 8) Medium 253k