Pound Sterling Down on Brexit Uncertainty
Sterling tumbled versus some of the majors yesterday as Brexit uncertainty gripped markets. Traders were concerned that a lack of progress in Brexit talks could lead to a cliff-edge scenario whereby Britain exits the European Union in March 2019 with no transitionary deal and no new trading arrangement with its largest trade partner. These anxieties heightened following chief EU negotiator Michel Barnier’s assertion that no ‘decisive progress’ had been made in the third round of talks in Brussels. The Pound weakened following the remark; however, it would be in nobody’s interest for Britain to leave without a new deal so volatility can be expected around future trade talks.
Pound to Euro Exchange Rate Down as Eurozone CPI Beats Forecasts
The Pound to Euro exchange rate drifted lower by around a quarter of a cent yesterday as Brexit anxieties weighed on Sterling. The single currency, meanwhile, was boosted by a better-than-anticipated Eurozone consumer price index print of 1.5%. The August inflation figure was up from 1.3% in July and beat estimates of a slightly softer rise to 1.4%. Spiking energy prices were the main contributor to the figure though, meaning that inflation in the currency bloc still has a long way to go before sustainably reaching the European Central Bank’s (ECB) 2.0% target level.
The single currency was lucky to avoid a drop-off in demand yesterday, with sources at the ECB reportedly telling Reuters that policymakers at the bank were considering delaying plans to taper quantitative easing due to the Euro’s recent strength. In the past, speculation of this nature has led to a softening of the single currency, but on this occasion the Euro escaped unscathed.
Pound to US Dollar Exchange Rate Flat Ahead of US NFP Report
Brexit fears drove ‘Cable’ lower yesterday morning but comments from the White House sent the US Dollar reeling during the evening.
US Treasury Secretary Steve Mnuchin told reporters that ‘as it relates to trade, having a weaker Dollar is somewhat better for us’, and demand for the ‘Greenback’ dipped as markets weighed up the possibility that the Trump administration may be waving goodbye to its strong Dollar policy. We could see USD appetite recover during today’s session when a couple of significant ecostats are released.
First up is the UK manufacturing PMI report for August, which is tipped to remain close to the 55.0 mark. In recent months the PMIs have tended to surprise traders; sometimes giving rosier-than-expected picture of the UK economy, sometimes a bleaker image. If this morning’s figure beats forecasts then we could see GBP/USD mount a rally.
The Pound also has the potential to rise versus the US Dollar if this afternoon’s August US non-farm payrolls report disappoints. Traders are primed for an NFP print of 180,000, down from 209,000 previously. Anything lower than the consensus could prove bearish for the ‘Greenback’, while anything above 200,000 could have the opposite effect.
Pound to Canadian Dollar Exchange Rate Sinks as Canadian GDP Impresses
The Pound to Canadian Dollar exchange rate slid by around -150 pips yesterday following some higher-than-anticipated Canadian GDP figures. The latest report showed that the North American economy grew at an annualised rate of 4.3% in June, beating forecasts of 4.1%, while on a quarterly basis GDP expanded 0.3%, beating the median market consensus of 0.1%. The upbeat growth numbers boosted the ‘Loonie’ as they were seen to strengthen the case for a rate hike from the Bank of Canada (BOC).
Pound to Australian Dollar Exchange Rate Tumbles -75 Pips
Sterling softened by around -75 pips versus the Australian Dollar yesterday as negative UK sentiment weighed on GBP/AUD. Demand for the ‘Aussie’, meanwhile, picked up following a massive 9.3% rise in Australian construction work, which smashed market expectations of just 1.0%.
Pound to New Zealand Dollar Exchange Rate Climbs Towards 3-Month High
The Pound to New Zealand Dollar exchange rate rallied by around 75 pips yesterday to strike its highest level since the start of June. Demand for the ‘Kiwi’ was impacted by an election poll, giving Labour a lead over the National Party for the first time in 12 years. The threat of political instability sent the high-yielding Antipodean currency tumbling to a near-three-month low.
Data Released Today
09:30 GBP Markit UK PMI Manufacturing SA (AUG) Medium 55
13:30 USD Change in Non-farm Payrolls (AUG) High 180k
13:30 USD Unemployment Rate (AUG) High 4.3%
13:30 USD Average Hourly Earnings (YoY) (AUG) Medium 2.6%
15:00 USD ISM Manufacturing (AUG) High 56.5