Pound Sterling (GBP) Exchange Rates Extend Losses as Brexit Fears Intensify
Brexit weighed on Pound Sterling (GBP) exchange rates once again yesterday, with markets spooked by Theresa May’s latest comments on the subject.
May noted that leaving the EU without any deal in place is ‘not the end of the world’, reigniting investor jitters. The odds of a no-deal Brexit also appeared to increase as Downing Street refused to commit to giving MPs a full impact assessment ahead of their final vote on the matter. Altogether, this left GBP exchange rates biased to the downside.
Today’s UK data calendar is sparse so the Pound may struggle to recoup its latest losses.
Confidence Data Could Support Euro (EUR) Exchange Rates
Mounting tensions over Italian spending plans limited the appeal of Euro (EUR) exchange rates on Tuesday, with the government looking set for a showdown with EU officials. If the budget conflict continues to escalate this could keep the single currency under pressure, raising the prospect of a fresh Eurozone crisis.
Even so, the relative weakness of the US Dollar helped shore up EUR exchange rates in spite of European political worries.
A steady reading from September’s German GfK consumer confidence index should limit the downside potential of the single currency ahead of tomorrow’s run of reports for the Eurozone.
US Dollar (USD) Could Recover on Growth Data
An unexpectedly sharp widening of the advance goods trade deficit in July gave the US Dollar (USD) little cause for confidence yesterday.
As the deficit widened from -67.9 billion to -72.7 billion on the month, the Trump administration looks set to continue its current approach to international trade. The prospect of a prolonged protectionist push left USD exchange rates on a downtrend as tensions with China continue to hang over the economic outlook.
However, confirmation that the US economy accelerated sharply in the second quarter is likely to bolster demand for the US Dollar.
Canadian Dollar (CAD) Boosted by US-Mexico Trade Talks
The breakthrough in US-Mexico trade talks offered encouragement to Canadian Dollar (CAD) exchange rates on Tuesday, even though Canada is not yet party to the deal.
This progress nevertheless boosted hopes that the US and Canada could soon resolve their differences regarding trade, diminishing the odds of any fresh tariffs coming into play. Brent crude prices also continued to trend comfortably, lending further support to CAD exchange rates.
A narrowing of the second quarter current account deficit may give the Canadian Dollar an additional boost in the hours ahead.
Australian Dollar (AUD) Bounces Back after Last Week’s Political Dramas
After the political turmoil of the last week the Australian Dollar (AUD) has returned to a stronger footing. A solid uptick in the ANZ Roy Morgan weekly consumer confidence index offered additional support to AUD exchange rates, suggesting that the recent political developments have not dented domestic sentiment. With global market trade tensions easing, the appeal of the commodity-correlated Australian Dollar naturally improved.
Even so, AUD exchange rates remain vulnerable to any fresh investor jitters or signs of disunity within the governing Liberal party.
New Zealand Dollar (NZD) Supported by Rising Risk Appetite
Although domestic data was lacking at the start of the week the New Zealand Dollar still found support on the back of a general improvement in market risk appetite. With the US Dollar on a softer footing the appeal of the commodity-correlated NZD strengthened, even though doubts remain over the underlying health of the New Zealand economy.
The New Zealand Dollar may struggle to gain much ground against its rivals, however, until investors find cause for confidence in the domestic outlook.