Pound Sterling Exchange Rates Spike on Brexit Talks Update
Pound Sterling (GBP) exchange rates received a boost yesterday when chief EU negotiator Michel Barnier intimated that he was ready to speed up the Brexit talks.
Barnier indicated that the agenda and dates for the next set of talks would be announced imminently, which markets saw as a sign that the negotiations could start focussing on future trade relatively soon.
Sterling registered gains across the board in reaction to the statement as concerns over a lack of progress softened slightly.
With Bank of England rate hike bets growing, we could see Sterling appreciate further today if this morning’s UK manufacturing PMI report comes in positively. Analysts are primed for a score in the region of 55.9.
Pound to Euro (GBP/EUR) Exchange Rate Rises Towards 3-Month High
The Pound to Euro exchange rate rallied by over half a cent yesterday to hit a new one-month high. The upbeat Brexit statement from Michel Barnier bolstered Sterling’s appeal, and GBP/EUR is now within 30 pips of striking its highest level for over three months.
Data from Europe showed that the Eurozone economy outpaced Britain’s 0.4% growth in the third quarter with a robust print of 0.6%, which outpaced expectations of 0.5%. Unemployment in the bloc also improved, dropping from 9.0% to an eight-year low of 8.9%.
However, sentiment towards the single currency remained constrained by soft price growth; Eurozone inflation came in weaker-than-anticipated at 1.4%, which was seen to leave the door open to loose monetary policy from the European Central Bank.
Pound to US Dollar (GBP/USD) Exchange Rate Could Strengthen if Fed Fails to Strike Hawkish Tone
Sterling struck a fortnightly high versus the US Dollar (GBP/USD) yesterday as a positive Brexit soundbite added to momentum behind the UK currency.
‘Cable’ could register further gains this evening if the Federal Reserve fails to strike a hawkish tone with regards to the chances of a final 2017 rate hike in December.
Markets are pricing just a 2% chance of a rate rise during today’s meeting, but anything less than a positive message about December could lead to a drop in demand for the ‘Greenback’. Traders are currently predicting a 98% chance of tighter policy in December, meaning that any ambiguity could lead to a reduction in rate hike bets.
Pound to Canadian Dollar Exchange Rate Jumps 200 Pips to Hit 4-Month High
The Pound to Canadian Dollar exchange rate rallied by almost 200 pips yesterday to strike a four-month high as bullish Sterling sentiment met with bearish demand for the ‘Loonie’.
It was reported that the Canadian economy shrunk -0.1% in the month of August, disappointing expectations of a +0.1% expansion. The news bolstered Sterling’s earlier gains versus the North American currency.
Pound to Australian Dollar Exchange Rate Strikes New 5-Month High
Sterling strengthened by around 150 pips yesterday to hit its highest level since the start of June as hopes over a Brexit deal and a UK rate rise bolstered the appeal of the Pound.
The BoE is tipped to raise interest rates for the first time in over a decade on Thursday and we could see GBP/AUD push ahead further if the UK central bank pulls through on rate expectations and also leaves the door open to future tightening.
If the BoE hikes 25 basis points but signals that no further rises are planned, it could actually weigh on Sterling as investors lock in profit.
Pound to New Zealand Dollar Exchange Slides from 16-Month High
The Pound to New Zealand Dollar exchange rate appreciated by a further 200 pips during the London session as Sterling maintained a bullish bias versus the Antipodean currency. However, GBP/NZD fell back from the 16-month high during the evening when New Zealand unemployment slid from 4.8% to 4.6%.
The better-than-expected figure marked the lowest jobless rate in New Zealand since the financial crisis.
Data Released Today
09:30 GBP Markit UK PMI Manufacturing SA (OCT)
13:30 CAD Markit Canada Manufacturing PMI (OCT)
14:00 USD ISM Manufacturing (OCT)
18:00 USD FOMC Rate Decision (Upper Bound) (NOV 01)
20:15 CAD Poloz and Wilkins testify at Senate