Signs of Brexit Progress Could Support Pound Sterling (GBP) Exchange Rates
Upbeat Brexit sentiment supported Pound Sterling (GBP) exchange rates on Friday and slender signs of progress could continue to prop Sterling up over the next week.
In order to prevent further political complications, EU leaders appear keen to offer UK Prime Minister Theresa May the opportunity to move forward with the Brexit trade talks, without forcing her to put a figure on Britain’s divorce bill.
Aware that May could face intense scrutiny at home if she a) fails to make any progress in the talks, or b) prematurely commits to paying a large figure to the EU, European officials stated on Friday that they would begin preparations to move into the second phase of Brexit talks in December. The caveat: the UK PM must make an improved divorce bill offer before the talks transition from divorce to future trade.
Comments suggest, however, that EU officials are prepared to trust that Britain will pay a fair share even if May does not name a specific figure – that could be used against her by hardline Brexiteers. Further political instability, of course could seriously jeopardise the negotiation process.
Pound to Euro (GBP/EUR) Exchange Rate Rises as Brexit Sentiment Improves
The Pound to Euro (GBP/EUR) exchange rate recovered by around 100 pips on Friday as investors responded positively to growing signs of understanding between the European institutions and the UK government.
The potential for Sterling to push ahead further exists if rhetoric surrounding Brexit remains upbeat, and expectations of talks progressing to the trade stage in December solidify.
Data on Friday showed that Britain’s trade deficit fell to its lowest level in the month of September for 10 years last month. Boosted by strong tax receipts, the figure came in at £5.9 billion, down -11% on September 2016.
The report also helped to bolster the appeal of the Pound, however, investors were generally more interested in the encouraging snippets of Brexit news than the UK trade figures.
GBP/USD Could Suffer as Fed Rate Hike Bets Rise
GBP/USD ticked higher by around a third of a cent on Friday, boosted by positive sentiment surrounding Britain’s negotiations with the European Union.
However, the potential for further Sterling gains versus the US Dollar could be limited by firming Federal Reserve rate hike expectations.
Over the weekend Fed Chairwoman Janet Yellen expressed confidence that inflation expectations are well anchored and that price pressures would rise to the 2% target over the next couple of years.
Futures markets showed that the probability of a December rate hike was seen to have increased from 73.3% to 83.6% following Yellen’s speech and this could weigh on GBP/USD over the next few days.
Pound to Canadian Dollar (GBP/CAD) Exchange Rate Jumps 250 Pips on Downbeat Canadian Data
The Pound to Canadian Dollar exchange rate rallied by a whopping 250 pips on Friday as disappointing domestic data weighed on Bank of Canada tightening expectations. The Canadian consumer price index came in at 1.6% in September, which was up on August’s 1.4% but slightly lower than market forecasts of 1.7%.
Traders were also disappointed by a -0.3% annual fall in August retail sales. Combined with increased uncertainty around US President Donald Trump’s commitment to the North American Free Trade Agreement (NAFTA), the downbeat data could cause the ‘Loonie’ to trend lower over the coming days.
Is the Pound to Australian Dollar (GBP/AUD) Exchange Rate on the Cusp of a Rally?
Sterling appreciated by around 170 pips versus the Australian Dollar on Friday and GBP/AUD could continue to mount a rally over the next few weeks as bullish momentum builds.
Technical trading conditions suggest the pair has the potential to drive higher, while positive Brexit sound bites could also help to increase demand for the Pound.
Pound to New Zealand Dollar Exchange Rate Rallies as Political Uncertainty Drags ‘Kiwi’ Lower
The Pound to New Zealand Dollar exchange rate leaped by around 250 pips on Friday and GBP/NZD could post more near-term gains as traders react to the surprise announcement of a coalition between Labour and New Zealand First.
The coalition announcement weighed on the ‘Kiwi’ because of the uncertainty around the implications of the new partnership.
15:00 EUR Euro-Zone Consumer Confidence (OCT A)