Pound Sterling Slips on UK PM Theresa May’s Brexit Speech
Sterling slipped versus the majors on Friday following UK Prime Minister Theresa May’s Brexit speech in Florence.
The UK PM laid out plans to maintain EU single market access during the proposed two-year transition period, with Britain committing to pay into the EU budget. EU chief negotiator said the speech showed ‘constructive’ spirit, however, currency traders concluded that the much-anticipated Brexit statement did not feature any significant new pieces of information. Essentially, the very high level of uncertainty around Britain’s EU exit remains.
Lack of Brexit Clarity Weighs on Pound to Euro Exchange Rate
The Pound to Euro exchange rate slid by around -80 pips on Friday as traders locked in profit from recent Sterling gains.
UK PM Theresa May’s Brexit speech indicated that the British government would be seeking a ‘creative’ new trade agreement with the EU after the two-year transition period ends in 2021. Although May did not elucidate on what this new trade deal could look like, she did state that Britain could ‘do better’ than membership of the European Economic Area or a Canada-style free trade agreement.
Rumours on Thursday had suggested that the UK was willing to pay €20 billion into the EU budget during the transition period, but the PM did not use a specific figure during her speech. Demand for the Pound softened during the speech, indicating that traders had hoped for more details on Britain’s post-Brexit trading relationship with the EU will look like.
The single currency also drew support from robust Eurozone private sector numbers for September. The composite PMI of services and manufacturing output rose from 55.7 to 56.7, which analysts said pointed to quarterly growth of around 0.7% in the currency bloc during the third quarter.
Pound to US Dollar Exchange Rate Loses Out as Brexit Uncertainty Remains
Without any meaningful new information on EU trade, Brexit uncertainties weighed on Sterling on Friday, allowing the US Dollar to rally by around 40 pips.
Across the pond in the US manufacturing data printed inline with market expectations, at 53.0, for September, while service sector data came in at 55.1, slightly lower than forecasts of 55.7. The PMI data had little impact on GBP/USD as it was not seen to influence, positively or negatively, Federal Reserve policy projections. The Fed intends to start winding down its $4.5 trillion quantitative easing programme in October and signaled that it could interest rates by 25 basis points in December.
Pound to Canadian Dollar Exchange Rate Down From 2.5-Month High Despite Canadian CPI Miss
Although Canadian inflation printed lower-than-anticipated, giving Sterling a temporary boost during the afternoon, the Pound to Canadian Dollar depreciated by around half a cent on Friday as Brexit uncertainty spooked traders.
The Canadian consumer price index for August printed at 1.4%, up from 1.2% in July but below expectations of 1.5%. The figure initially impacted demand for the ‘Loonie’, but the Bank of Canada (BOC) is still likely to resume its hiking cycle in the near-term and thus the Canadian Dollar managed to overcome the minor setback.
Pound to Australian Dollar Exchange Rate Down -150 Pips
Sterling slid by around -150 pips against the Australian Dollar on Friday, giving up its perch at a two-and-a-half-month high in the process. Prime Minister Theresa May’s Brexit speech did not meet market expectations, in terms of new information and Brexit clarity, and this weighed on GBP/AUD during the session.
Pound to New Zealand Dollar Exchange Rate Tumbles -120 Pips
The Pound to New Zealand Dollar exchange rate depreciated by around -120 pips on Friday as Brexit uncertainty took a grip over currency traders once again.
09:00 EUR German IFO – Business Climate (SEP)