Political Chaos Threatens the Pound (GBP)
The Pound (GBP) got off to a poor start this week as investors grew increasingly skittish ahead of what looks to be a pivotal week in UK politics.
Adding to the pressure on Sterling yesterday was the publication of the UK’s manufacturing PMI, as domestic factory growth slumped to a seven-year low in August.
With parliament returning from summer recess today, GBP exchange rates remain vulnerable to additional losses.
MPs are expected to try and push through legislation aimed at blocking a no-deal Brexit at the earliest opportunity, with observers speculating on the possibility this could lead to a snap election being called in the event of a government defeat.
GBP/EUR Exchange Rate Losses Capped by ECB Speculation
Heightened political uncertainty saw the Pound Euro (GBP/EUR) exchange rate shed around half a cent in European trade on Monday.
However the single currency was unable to replicate this success in broader trade, with EUR sentiment being undermined by mixed Eurozone PMIs, which bolstered expectations of aggressive stimulus measures from the European Central Bank (ECB) this month.
Given the weak Eurozone growth outlook and ECB rate cut expectations the Euro may continue to struggle to hold its ground.
Trade Optimism Extends Losses in GBP/USD Exchange Rate
While US markets were closed for Labour Day yesterday, it didn’t stop the US Dollar (USD) from extending its bullish run against the Pound (GBP).
This upside in USD was helped by optimism regarding US-China trade, in response to President Donald Trump’s commitment to hold high level talks in Washington this month.
The US Dollar could struggle to consolidate these gains today however, with the ISM manufacturing PMI potentially exerting some downward pressure on USD exchange rates if US factory activity continued to slow in August.
GBP/CAD Exchange Rate Slides, BoC in Focus
The Pound to Canadian Dollar (GBP/CAD) exchange rate stumbled to a two-week low at the start of this week, with the ‘Loonie’ strengthening ahead of the Bank of Canada’s (BoC) policy meeting on Wednesday.
BoC policymakers are expected to keep interest rates unchanged at 1.75% this month, but CAD could dip if they strike a surprisingly dovish tone in their forward guidance.
GBP/AUD Exchange Rate Plunges Following RBA Policy Meeting
The Pound to Australian Dollar (GBP/AUD) exchange rate plummeted to a new two-week low overnight on Monday in reaction to the Reserve Bank of Australia’s latest policy meeting.
The bank’s decision to leave rates on hold, coupled with its optimism regarding the domestic economy, helped to boost AUD exchange rates.
Australia’s GDP figures may extend the ‘Aussie’s gains later tonight if growth accelerated in the second quarter as forecast.
GBP/NZD Exchange Rate Slips amid Improved Risk Sentiment
After falling over a cent on Monday, the Pound to New Zealand Dollar (GBP/NZD) exchange rate continued to weaken overnight as improving risk sentiment helped to boost the ‘Kiwi’.