Pound Slips on Brexit Woes, Rebounds on BoE Comments

Pound (GBP) Falters as Brexit Optimism Subsides 

The Pound (GBP) was subdued at the start of yesterday’s session as Friday’s Brexit optimism faded, with GBP investors once again worried that the Northern Ireland protocol dispute could spark an EU-UK trade war. 

News that Royal Dutch Shell plans to move its tax home and headquarters to the UK helped Sterling recover some ground in the afternoon, as did comments from Bank of England (BoE) Governor Andrew Bailey, who said he was ‘very uneasy’ about rising inflation. 

This morning the Pound has surged. The latest UK jobs data suggests that the labour market remains strong despite the end of furlough. As a result, markets may raise bets for a rate hike at the BoE’s next meeting. 

Euro (EUR) Slips on Trade Surplus Miss 

The Euro (EUR) took a tumble yesterday as the Eurozone’s trade surplus printed at just €7.3bn in September 2021, compared to €24.1bn in the same month last year. 

Comments from European Central Bank (ECB) President Christine Lagarde pushed EUR down further. Lagarde told EU lawmakers tightening policy now would ‘cause far more harm than it would do any good’. 

The Eurozone’s employment change and GDP growth rate for the third quarter of this year are both set to edge higher by 0.1 percentage points. Will this be enough to support EUR exchange rates today? 

US Dollar (USD) Muted amid Lack of Data 

The US Dollar (USD) was subdued yesterday as a lack of market-moving US data left the ‘Greenback’ without a clear trajectory. 

A risk-on market mood also weighed on the safe-haven currency, while hawkish expectations from the Federal Reserve limited losses. 

Looking ahead, US retail sales are forecast to have risen by 1.2% last month, which could provide the US Dollar with a boost this afternoon. 

Canadian Dollar (CAD) Gains on BoC Rate Hike Bets 

The Canadian Dollar (CAD) firmed yesterday, underpinned by expectations that the Bank of Canada (BoC) will raise interest rates before many of its counterparts. 

A recovery in oil prices lent the commodity-linked ‘Loonie’ further support as the North American session got underway. In the absence of any key Canadian data today, oil prices may continue to drive movement in CAD. 

Australian Dollar (AUD) Dips on Dovish RBA 

The Australian Dollar (AUD) fell overnight after Reserve Bank of Australia (RBA) Governor Philip Lowe signalled that a rate hike next year is highly unlikely. 

New Zealand Dollar (NZD) Pulled Down by Weaker AUD 

The New Zealand Dollar (NZD) also ticked lower in overnight trade as its positive correlation to the ‘Aussie’ dragged the ‘Kiwi’ down. 

Samuel Birnie

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