Turbulence for Pound Sterling Exchange Rates as Theresa May Rejects EU Brexit Text Over Irish Border Dispute

Pound Sterling Exchange Rates Slide as Irish Border Issue again Threatens Brexit Negotiations

The Pound slumped yesterday after the UK government quickly shot down the EU’s first draft of Brexit legislation.

The text, which suggested that Northern Ireland should retain regulatory alignment with the bloc and would therefore be subject to the jurisdiction of the European Court of Justice (ECJ), was described by Theresa May as something no UK Prime Minister could agree to.

The UK manufacturing PMI for February could significantly weaken the Pound today if it falls again, as it did in January.

Firm Core Price Growth and German Unemployment Drop Undermines GBP/EUR

The GBP/EUR exchange rate slumped yesterday, although elsewhere the Euro was weakening versus the commodity correlated currencies.

Markets were pleased with the latest Eurozone economic data, which showed a larger-than-expected decline of 22,000 in the rate of joblessness in Germany.

While overall Eurozone consumer price growth did slow from 1.3% to 1.2%, the more insightful core price index held steady at 1%.

GBP/EUR may be pushed lower by Eurozone data today, as the unemployment rate for the currency bloc is expected to have fallen from 8.7% to 8.6% during January.

GBP/USD Exchange Rate Collapses as US Data Shows Above-Forecast Price Growth

The Pound Sterling to US Dollar exchange rate tumbled towards losses of -1% yesterday after stronger-than-expected US growth data.

Annualised GDP slipped from 2.6% to 2.5% as predicted quarter-on-quarter during the final three months of 2017, but the GDP product price index unexpectedly held steady at 2.4%. This is a good sign for domestic inflation and therefore the US monetary policy outlook.

The Federal Reserve’s preferred measure of inflation, the personal consumption expenditure indicator, is set for release today.

GBP/CAD Tumbles despite Lacklustre Canadian Dollar Demand

The Canadian Dollar was largely on soft form yesterday, but the GBP/CAD exchange rate still dropped.

A strong US Dollar and weaker-than-expected industrial product price growth month-on-month weighed on appetite for the ‘Loonie’, but the Pound was in no position to capitalise on its weakness.

The Canadian Dollar could strengthen today if the RBC manufacturing PMI for February rises or holds around its current strong level of 55.9.

GBP/AUD Exchange Rate Weakens despite Poor Australian and Chinese Data

The GBP/AUD exchange rate lost nearly 1% yesterday, with the Australian Dollar shrugging off a mix of headwinds that should have sent it tumbling.

First, private sector credit growth was slower-than-expected during January, indicating weaker business confidence and investment.

Next, the Chinese manufacturing PMI barely avoided dropping into contraction territory during February. Additionally, the US Dollar and Euro were strengthening.

However, AUD has reached multi-week lows versus many of its peers, so speculators were taking the opportunity to buy it up while it was cheap.

GBP/NZD Slides despite New Zealand Dollar Weakness

The strong US Dollar was weighing on the New Zealand Dollar yesterday, but the GBP/NZD exchange rate still tumbled.

An improving ANZ activity outlook and business confidence report couldn’t help the ‘Kiwi’ make gains elsewhere.

New Zealand consumer confidence data for February and building permits figures for January are set for release tonight.

Laura Parsons

Laura has been working in the financial services sector since 2012 and provides currency news updates for a number of online and print publications. Over the years she has produced exchange rate analysis for publishers like French Property News, The Express, The Telegraph and Forbes.

Contact Laura Parsons