Pound Exchange Rates Trim Gains as May Spokesman Diminishes Brexit Optimism
Although Pound Sterling (GBP) managed to hold firm against the Euro (EUR) on Monday, the British currency slipped against the US, Australian and New Zealand Dollars as Brexit-based optimism dimmed.
Comments from Theresa May’s spokesman, James Slack, undermined bets that the UK and EU are approaching a deal. As Mr Slack indicated that big issues are still yet to be resolved the prospect of a November agreement took a hit, leaving GBP exchange rates exposed to fresh losses.
Without the support of an imminent Brexit deal Sterling looks set to remain biased to the downside today.
Escalating Italy-EU Tensions Keep Euro Exchange Rates under Pressure
As tensions between the Italian government and EU continued to mount, demand for the Euro (EUR) diminished. Markets continue to fear the prospect of a fresh Italian debt crisis as the dispute over budget proposals rumbles on.
Confidence in Euro exchange rates was also dented by disappointing German industrial production data, which showed an unexpected contraction of -0.3% on the month in August.
If the German trade surplus fails to widen today the Euro could face additional selling pressure.
Fed Rate Hike Bets Keep US Dollar (USD) Exchange Rates Buoyant
A general sense of market risk aversion helped to keep the US Dollar (USD) on a stronger footing at the start of the week despite US markets being closed.
Confidence in the odds of the Federal Reserve raising interest rates again before the end of the year remain high, keeping USD exchange rates elevated.
Forecasts point towards a dip in the NFIB small business optimism index today but the data is unlikely to alter the mood towards the US Dollar.
Levelling off of Oil Price Weighs Heavily on Canadian Dollar (CAD)
Oil prices retreated slightly on Monday, leaving the Canadian Dollar on a downtrend against many of the majors.
Brent crude fell back from its four-year high of US$85 per barrel, with reports suggesting that Iran will maintain some of its exports even as US sanctions come into force in November. In the absence of any particular sense of market risk appetite CAD exchange rates failed to find much support.
An increase in housing starts, however, may offer the Canadian Dollar a rallying point, with a more resilient housing market likely to encourage the Bank of Canada (BoC).
Chinese Liquidity Measures Support Australian Dollar (AUD)
Although the prospect of further rate hikes from the Federal Reserve initially piled pressure on the Australian Dollar (AUD), China’s measures to boost liquidity later helped the ‘Aussie’ advance on the US Dollar, Pound and Euro.
An improvement in Australia’s consumer confidence index could support the Australian Dollar tomorrow.
New Zealand Dollar picks up in Spite of Worries over RBNZ Outlook
News of the latest Chinese liquidity-boosting measures also helped to support the New Zealand Dollar yesterday, even as the US Dollar remained resilient. The widening policy divergence between the Fed and Reserve Bank of New Zealand (RBNZ) was not enough to prevent NZD exchange rates firming.
Positive card spending data from New Zealand could also give NZD exchange rates a little lift today.