GBP/EUR Exchange Rate: Brexit Uncertainty on the Rise Again
The Pound swung higher towards the end of last week, lifted by some stronger-than-expected retail sales figures from May.
Sterling has struggled to hold these gains going into this week however, with the currency being undermined by some gloomy growth forecasts at the start of the session.
These losses were further extended on Tuesday, with a defeat for the government’s EU withdrawal bill in the House of Lords stoking Brexit uncertainty.
Wednesday will see the House of Commons vote on the amended bill, potentially leading to further weakness in the GBP exchange rate, should enough rebel Tory MPs vote against the government.
Markets are unlikely to dwell on the vote for long however, with the Bank of England’s (BoE) policy meeting on Thursday likely to become the centre of attention. Investors will be looking to gauge the bank’s outlook on the possibility of an August rate hike.
GBP/USD Exchange Rate: Could Defeat Lead to a Leadership Challenge for Theresa May?
The recent downturn in the Pound can be seen even more clearly against the US Dollar, with the GBP/USD exchange rate striking a new seven-month low ahead of Wednesday’s Brexit vote.
Adding to the concerns surrounding today’s vote are fears that a loss for Theresa May could greatly undermine her position as Prime Minister.
This may lead to calls within her party for her to step down, an outcome which could see the UK face the uncertainty of another general election later in the year, and something which would not be welcomed by GBP investors.
Even without a potential leadership challenge, the long-term outlook for the Pound remains fairly bleak, with the UK’s slowing economy and growing Brexit uncertainty likely to dent the appeal of the currency for some time to come.
USD/GBP Exchange Rate: US Dollar Demand Surges as Global Uncertainty Takes Hold
After a brief lull last Wednesday following the latest Federal Reserve rate decision, the US Dollar tore higher in the latter half of last week, with demand surging following a sharp drop in the Euro.
The USD exchange then rode this wave higher going into this week, as ‘safe-haven’ demand rocketed amid rising geopolitical uncertainty.
US trade policy appeared to be the driving force behind this rise, with markets increasingly worried about the possibility of a trade war between the US and China, as Trump threatens to hit Chinese exports with further tariffs.
This uptrend in the US Dollar looks set to continue for a while longer as well, with US data likely to remain supportive of USD as economists forecast the economy will have gone from strength-to-strength in the second quarter.
EUR/USD Exchange Rate: Euro Plummets as ECB Pledges to Leave Rates on Hold
It proved to be a trying time for EUR investors last week, with the Euro collapsing in the wake of the European Central Bank’s (ECB) June policy meeting.
The crash came after ECB President Mario Draghi pledged to leave interest rates on hold until ‘at least summer 2019’, completely overshadowing the bank’s accompanying announcement that it would end its quantitative easing programme by the end of 2018.
This week’s session has so far proved to be equally difficult for the Euro, with a dispute over migrants almost threating to rip apart Germany’s fledgling coalition government.
Adding to this were further comments from Draghi at an ECB forum in Portugal, in which he hammered home his message that the next rate hike would be a long way off.
This again leaves the Euro in a precarious position going into the second half of the week, especially with the Eurozone’s private sector expected to report that growth continued to slow in June.