Daily Currency Update: Pound Turns Volatile on Hopes and Fears for Brexit

Published: 13 Oct at 1 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, Mexico,

Pound Sterling (GBP)

The Pound’s rollercoaster movement today has come from varying responses to a flood of Brexit news, which started on Thursday.

At a joint press conference between David Davis and Michel Barnier, the two top negotiators gave contrasting reports.

Davis struck an optimistic tone, but Barnier warned about encountering a ‘disturbing deadlock’.

The Pound initially fell on this news, only to rebound on renewed hopes that there could be a Brexit transitional period.

More recently, European Commission President Jean-Claude Juncker stated that the UK would have to commit to paying an EU ‘divorce bill’, which sent the Pound tumbling again.

Next week, Pound traders will be focused on UK inflation and earnings data.

If inflation rises but wage growth slows, the Pound could be devalued because of worsening wage squeeze conditions.

Euro (EUR)

Today has seen the Euro decline across the board, following a cautious statement from Mario Draghi.

The President of the European Central Bank (ECB) stated that low interest rates were likely to persist for a considerable time, even after the bank ceases its quantitative easing program.

Apart from a few ECB speeches coming over the weekend, the Euro could otherwise be affected by the Eurozone trade balance data on Monday.

Expectations are for a reduction in the current surplus, which could weaken the Euro.

US Dollar (USD)

While it has advanced against the Euro today, the US Dollar has made notable losses in other currency pairings.

The USD has lost ground today, despite recent optimism from the Federal Reserve.

A new face among policymakers, Fed official Raphael Bostic has supported there being three US interest rate hikes in 2017, which has raised the chances of a hike in December.

This afternoon might bring news of higher US inflation and retail sales, which would increase the odds of a December rate hike and might trigger a USD rally.

Australian Dollar (AUD)

There have been warning signs from the latest Reserve Bank of Australia (RBA) financial stability report, but these have failed to prevent strong Australian Dollar movement.

The RBA report has focused on problems in the housing market, as well as the mounting level of household debt that threatens to trigger a mass destabilisation.

With this news out, the Australian Dollar could instead be appreciating because of US economic uncertainty.

The RBA will remain in the spotlight on the coming Tuesday, when the bank’s minutes for its early October meeting come out.

If these show that the bank could hold off on higher interest rates for the foreseeable future, the Australian Dollar could slide in value.

New Zealand Dollar (NZD)

With NZ coalition talks continuing to drag on, the New Zealand Dollar has nonetheless advanced against the Pound, Euro and US Dollar today.

This positive trading movement follows the news that business activity has remained relatively high in September against forecasts.

The smaller-than-expected decline in business confidence has come after a disappointing consumer confidence score, which showed a dip from 129.9 points to 126.3.

The NZ services activity measure is due late on Sunday; if this shows significant growth then the New Zealand Dollar could enter trading next week in a stable, advantageous position.

Canadian Dollar (CAD)

Apart from advancing against the soft Euro today, the Canadian Dollar has otherwise traded poorly because of concerns about the future of the North American Free Trade Agreement (NAFTA).

The trade deal is between the US, Canada and Mexico, but recently Donald Trump has attempted to renegotiate the deal in the US’s favour.

There is currently high uncertainty about a future without the NAFTA deal, given that it would account for a large amount of lost revenue for Canada.

Next week will see Canadian manufacturing sales announced on Wednesday.

As of Friday, 13th October 2017, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1236, GBP USD exchange rate was 1.3286, GBP AUD exchange rate was 1.6844, GBP NZD exchange rate was 1.8495, GBP CAD exchange rate was 1.6563, and GBP MXN exchange rate was 25.1305.

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