The Pound is down significantly against the US Dollar this morning, dropping to $1.28. Against the Euro it is more steady at around the €1.11 mark.
The main reason for GBP/USD dropping is the fact the US Dollar is gaining strength and becoming more expensive to purchase. Emerging markets are facing a crisis at the moment, and that’s helping to strengthen ‘safe haven’ currencies like the US Dollar.
Are the EU about to reject Theresa May’s latest Brexit Plan?
Back to the Pound. Sterling is actually steady despite more disappointing data this morning in the form of lower than expected Manufacturing numbers. Investors are shrugging off economic data releases, instead waiting with baited breath for more news about how Brexit negotiations are going. There are rumours that the EU chief negotiator Michel Barnier is going to reject Theresa May’s latest proposals that were discussed at chequers.
If he does, what effect would this have on Sterling exchange rates?
If he does, it’s likely to weaken the Pound further. Parliament returns from its summer break, and the next month is going to be an important one for May. She’s facing challenges from within her own party as well as elsewhere. There is also the Conservative Party conference at the end of the month, which could give indications of how much support she has. If there were rumours of a leadership change, then this would create even more uncertainty, which in turn would likely to push the Pound lower. There’s could be trouble ahead for May, and anything that increases the uncertainty will also increase pressure on the Pound.
What else is moving exchange rates?
Elsewhere, we have an Inflation Report for the UK at 1.15pm that could affect future interest rate movements. Mark Carney will be speaking, and when he does it’s usually the case that the Pound falls.
Europe has some inflation numbers tomorrow along with a speech by one of the ECB members. Friday sees EU GDP numbers that could affect the value of the Euro.
But as our regular readers will be aware, any announcements about Brexit remain the main driver for GBP/EUR rates for the rest of this week, with significant downside risks present for Sterling.
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