Further to my colleague Alastair’s post the pound has rallied on news that Brexit could be delayed. Rumours have circulated, that even should PM Theresa May pass her Brexit bill on Tuesday, it has been suggested there will not be enough time to pass up to 6 key bills to enable the UK to leave on the 29th March. This suggests that Article 50 will be extended……….
You can see from the live graphs that he pound has rallied as result and we will have more updates as we get them……..
Pound/Euro rates remain range-bound ahead of next week’s key Brexit vote. Yesterday saw the pair fall to the low €1.10’s which was due to markets pricing in the possibility of a General Election. In the wake of the government losing 2 key commons votes, the chances of a General Election have increased, although it’s still unlikely. Regardless of your personal view, markets do not like the prospect of a Labour government that would embark on policies of high borrowing and spending which would weaken the Pound and weigh heavily on Sterling.
This morning rates have recovered slightly on the chances of a new referendum. It’s a surprise that the Pound has recovered, as this morning’s economic data releases were quite poor. Trade Balance numbers were worse than expected. Industrial and Manufacturing figures came in way below forecast too. GDP numbers however, were slightly better at +0.2% which was more than markets had been expecting, which could be why the Pound didn’t fall. The other reason is that some think that a new referendum could be on the cards, and that would be Sterling positive. My view is that it would only increase division. The polls suggest nothing much has changed since 2016 and it would be about 50/50. If remain won by a small margin, then there would be calls for a 3rd referendum. Where would it end?
As things stand I expect GBP/EUR to remain at €1.1050/€1.11 until we get further information on what is likely to happen next week. Markets are just sitting back to see how it all unfolds. Most downside risks are already priced in to the Pound.
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Sterling exchange rates have opened poorly this morning with the pound now having fallen 1.2% against the single currency this year. Sterling has, however, remained stable against a number of other currencies, and has actually posted small gains against the US dollar – further reactions to yesterdays’s comments from Fed President Raphael Bostic
Sterling has remained on the back foot this week, with much of the movement being attributed to the various outcomes for next months vote as explored by my colleague Alastair in his post yesterday
As you can see there are a number of different outcomes and it is this uncertainty that is creating a nervous feeling and uncertain picture for the pound.
Today is relatively quiet and it is likely to be movements from currencies elsewhere that dictates the pounds trends. For anyone looking at GBP positions in the short term it would be advisable to keep an eye on tomorrows industrial and manufacturing data. Both are expected to make strong improvements from last month, and if as forecast, then the pound should have a strong end to the week. A move that would be welcomed before next weeks expected volatility.
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US dollar exchange rates have fallen this afternoon, particularly against the Euro to bring rates below 1.15 for the first time in nearly three months.
Movements have been attributed to comments made by Federal Reserve president Raphael Bostic who suggested the Fed may only look to raise interest rates once throughout the course of 2019. He mentioned his view was driven by conversations with business executives who have become more defensive in anticipation of slower growth.
With previous forecasts and analysts suggesting a up to two or three hikes in 2019 the market appetite for the US dollar appears to be waning and this could see a sustained period of US dollar weakness. There has been a sudden shift in market confidence in the US with the stock market showing recent heavy losses and market confidence, particularly surrounding economic growth, beginning to fall. This means the recent period of US dollar strength could be coming to an end, particularly against the Euro.
As a direct result of the US dollar weakness we have also seen the Euro rally against the Pound. This can be typical as they often have a direct correlation. With USD/EUR trades accounting for over 70% of market flows, big moves for EUR/USD will often mean subsequent movements for EUR/GBP. This trend has happened this afternoon with the EUR/GBP rate reaching 0.9036
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