Political Concerns Take Focus as Brexit Jitters Keep Pressure on Pound (GBP)

Published: 23 Oct at 4 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada,

Pound Sterling (GBP)
After its surge on Friday, the Pound saw slower movement on Monday. The British currency avoided shedding much of its recent gains due to lasting hopes that Brexit negotiations would soon progress enough to lead to the second phase of talks – including UK-EU trade.

While investors were still a bit more optimistic about the Brexit process than last week, mutterings that UK Prime Minister Theresa May was ‘begging’ for assistance from EU leaders at a dinner earlier in the month caused some traders to be anxious that May’s domestic position was still weak.

Euro (EUR)
The Pound to Euro exchange rate continued its recovery on Monday following its Friday surge. While the Brexit bullishness had worn a bit thin, the Euro was weakened by market jitters about Catalonia and the European Central Bank’s (ECB) upcoming monetary policy decision.

Over the weekend, the Spanish government indicated that it would be taking direct legal control over Catalonia in the coming weeks. However, concerns remain that Catalonia could still attempt to declare independence and fight Spain’s control. This has kept pressure on Euro trade.

On top of that, markets are speculating that the European Central Bank (ECB) will attempt to make its quantitative easing (QE) unwinding plans sound as dovish as possible in order to prevent the Euro from strengthening.

US Dollar (USD)
The Pound to US Dollar exchange rate fluctuated on Monday as hopes for Brexit progress were unable to boost the Pound much against the strong ‘Greenback’.

While the ‘Greenback’ Dollar was held back slightly by uncertainty about who US President Trump would announce as the new Federal Reserve Chair, high Fed interest rate hike bets as well as hopes for progress in US tax reform have left the US currency strong.

The Chicago Fed’s national activity index also beat expectations in its September print. The results rose from -0.37 to 0.17, rather than to just -0.10.

Australian Dollar (AUD)
The Pound to Australian Dollar exchange rate edged higher on Monday afternoon but has largely fluctuated since markets opened.

Due to the persistent strength of the US Dollar, as well as Brexit hopes supporting the Pound, the risky Australian Dollar wasn’t strong enough to push GBP/AUD lower.

Iron ore futures have been mixed too, indicating that there isn’t much to be hawkish about regarding prices of Australia’s most lucrative commodity.

New Zealand Dollar (NZD)
The Pound to New Zealand Dollar exchange rate hit a fresh 2017 high on Monday, following last Friday’s NZ election-inspired surge.

New Zealand’s new coalition government was confirmed on Friday. Amid expectations that the Labour Party and new Prime Minister Jacinda Ardern would have a different economic agenda to the previously ruling National Party, NZD trade has been wrapped in uncertainty.

Uncertainty about how well the Labour-NZ First coalition will operate together has also caused New Zealand Dollar uncertainty.

While the pair has slipped back from its 2017 high, the New Zealand Dollar’s recovery potential is limited until the coalition’s economic plans become clearer.

Canadian Dollar (CAD)
Canadian data has continued to disappoint in recent sessions, making the Canadian Dollar even less appealing to investors. The Pound to Canadian Dollar advanced on Monday afternoon and hit its best levels since the beginning of the month.

Last Friday’s Canadian inflation rate data worsened concerns that the Bank of Canada (BOC) may have jumped the gun on its recent interest rate hikes and this dulled bets of any further rate hikes from the bank any time soon.

Monday’s August wholesale sales data was forecast to come in at 0.6%, but instead dropped from 1.7% to 0.5%. Overall, Sterling easily strengthened against the weak ‘Loonie’.
As of Monday, 23rd 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 1.3202, GBP AUD exchange rate was 1.6905, GBP NZD exchange rate was 1.8919, and GBP CAD exchange rate was 1.6693.

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