Pound to Euro Fluctuates amid Brexit Concerns, Risk-off Trade Sends Pound to US Dollar Lower
The Pound (GBP) trended lower through the first half yesterday’s trading session as GBP investors were unnerved by fresh Brexit jitters.
This was triggered by Vice-President of the European Commission for Interinstitutional Relations, Maroš Sefčovič warning that the UK’s Internal Market Bill is a ‘heavy blow to trust’.
However, Sterling subsequently rebounded after EU officials told Reuters that the UK and EU were getting closer to a deal.
This failed to stop the Pound to US Dollar exchange rate falling, however, as risk-off trade weakened GBP/USD.
Meanwhile, the Pound to Euro exchange rate is trading in a narrow range today while investors exercise caution over Brexit and markets continue reacting to US political news.
In the absence of any notable GBP data releases it’s likely we will see Sterling sentiment continue to be driven by Brexit today, potentially infusing additional volatility into the Pound.
Euro (EUR) Flat as Lagarde Expresses Concerns over Economic Recovery
The Euro (EUR) struggled for direction on Tuesday, after European Central Bank (ECB) President Christine Lagarde expressed her concerns over the Eurozone’s economic recovery.
Lagarde warned that instead of a V-shaped recovery the rebound in growth is likely to prove uneven, offering hints that more monetary stimulus may be on its way.
This offset data showing that Germany enjoyed a stronger-than-expected rise in factory order growth in August.
As a result, the Euro to Pound exchange rate remained in a narrow range, whereas the Euro to US Dollar weakened in the market sell-off.
Meanwhile, the release of Germany’s latest industrial production figures may limit the appeal of the Euro today, after data published earlier this morning revealed a shock fall in factory output in August.
US Dollar (USD) Surges as Trump Pulls the Plug on Stimulus Talks
After spending most of yesterday’s session on the back foot, the US Dollar (USD) climbed following a tweet by Donald Trump in the second half of the US trading session.
Trump shocked markets by calling for an immediate halt to stimulus talks between the Democrats and Republicans, driving a broad market sell-off which bolstered the appeal of the safe-haven US Dollar.
This sent USD exchange rates higher across the board, with the US Dollar making gains against the Pound and Euro. At the same time, the ‘Greenback’ made over 1% gains versus the South African Rand and other emerging market currencies.
Turning to today’s session the spotlight will be on the FOMC minutes from the Federal Reserve’s September policy meeting. Will the minutes shed any additional light on the bank’s policy intention or its outlook for the US economic recovery?
The minutes will likely drive additional volatility in USD exchange rates as Fed Chair Jerome Powell already warned on Tuesday that the US economic outlook is ‘highly uncertain’.
So far today, the confusion created by Trump surrounding a new US stimulus package has left investors uncertain, and the Pound to US Dollar exchange rate flat.
Canadian Dollar (CAD) Fails to Climb on Oil Surge
The Canadian Dollar (CAD) was left mostly rangebound on Tuesday as the traditionally commodity-linked ‘Loonie’ failed to rally on the back of a notable rebound in oil prices which propelled WTI crude back above $40.
Coming up, we could see CAD exchange rates find some support later today, if Canada’s latest Ivey PMI reports another robust increase in economic activity.
Australian Dollar (AUD) Plunges Following US Stimulus Disappointment
The Australian Dollar (AUD) fell sharply overnight on Tuesday as the risk-sensitive currency suffered in the sell-off following Trump’s stimulus tweet.
New Zealand Dollar (NZD) Retreats in Risk-Off Trade
The New Zealand Dollar (NZD) also fell back in overnight trade as the emergence of a clear risk-off tone weighed heavily on the ‘Kiwi’