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Brexit Uncertainty and Construction Downturn Sends Sterling (GBP) Lower

Published: 2 Oct at 11 AM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, China, Germany,

Pound Sterling (GBP) Falls as Brexit Uncertainty Plagues Construction Sector

On Wednesday, Sterling was left under pressure as data revealed the UK construction slump worsened as Brexit uncertainty plagued the sector. The PMI plummeted further into contraction, with September’s reading the second worse since the financial crisis.

Added to this, Brexit continued to keep the Pound under pressure ahead of the release of details of the Prime Minister’s ‘final’ offer to the EU.

Meanwhile, looking ahead to Thursday, it is likely the Pound will extend its losses following the release of the UK services PMI.

If the services sector inches closer to stagnation, with the likelihood of the sector falling into contraction in the future, it is likely Sterling will slide.

Pound Euro (GBP/EUR) Exchange Rate Flat as ECB President Draghi Calls for Fiscal Stimulus

The Euro (EUR) was left muted against the Pound (GBP) on Wednesday as Brexit pessimism and worries about economic growth in the Eurozone weighed on the pairing.

On Tuesday data revealed that the bloc’s inflation rate fell below 1%, putting further pressure on the European Central Bank (ECB).

Meanwhile, in a speech on Tuesday evening, ECB President Mario Draghi said the most effective treatment for the bloc’s sluggish economy is investment-led stimulus. However, the single currency was left under pressure as the uncertainty over the future of the ECB’s recently announced stimulus package remains in the spotlight.

Looking ahead to Thursday, the Euro could slide as Germany’s PMI composite is expected to plunge into contraction in September.

Pound US Dollar (GBP/USD) Exchange Rate Falls Ahead of US Employment Data

On Wednesday, the US Dollar (USD) steadied against the Pound (GBP) after Wednesday’s disappointing manufacturing data sent the currency down from two-year highs.

US manufacturing plummeted at the fastest pace in over a decade in September, revealing the United States was the latest casualty of the US-China trade tensions.

Looking ahead to this afternoon, the US Dollar is likely to remain under pressure ahead of today’s ADP employment change data. As this provides an insight into the health of the economy, higher employment change could mean stronger US non-farm payrolls later this week, and could buoy the Dollar.

Pound Canadian Dollar (GBP/CAD) Exchange Rate Left Muted as Canadian Manufacturing PMI Rises

The Pound Canadian Dollar (GBP/CAD) exchange rate was left flat on Wednesday despite data revealing the Canadian manufacturing PMI edged its way above the 50 no-change mark on Tuesday.

The ‘Loonie’ was left muted despite a slight increase in manufacturing production and new orders, and the quickest pace of job creation since February.

Meanwhile, CAD was likely muted as oil prices were left mixed on Wednesday in response to weak global stock markets.

Looking ahead, due to a lack of Canadian economic data releases it is likely the ‘Loonie’ will edge up against a weaker Sterling as UK Services data is likely to disappoint.

Pound Australian Dollar (GBP/AUD) Exchange Rate Flat as RBA States More Cuts are Inevitable

The Pound Australian Dollar (GBP/AUD) exchange rate was left muted on Wednesday as AUD remained under pressure from the Reserve Bank of Australia’s (RBA) third interest rate cut this year.

The RBA slashed rates to a fresh low of 0.75%, and in the statement accompanying the decision Governor Philip Lowe noted that more work needed to be done to support the economy.

In his speech following the decision, Lowe noted that further cuts are inevitable, which sent the ‘Aussie’ lower.

Meanwhile, overnight the Australian Dollar could claw back some losses and edge up against Sterling. If AIG’s services index rises higher than expected, and CommBank’s PMI composite claws its way above the 50 no-change mark, AUD will rise.

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Muted as Dairy Prices Edge Up

The New Zealand Dollar (NZD) was left flat against the Pound (GBP) on Wednesday morning as US data added to signs the US-China trade war is taking its toll on the US economy.

Meanwhile, Wednesday’s Global Dairy Trade auction revealed dairy prices edged up, with the average price per tonne rising by US$3. However, the slight increase in prices did little to buoy NZD.

Looking ahead to the rest of the week, due to a lack of economic data releases for New Zealand it is likely further data releases that increase fears of a worsening global slowdown, and cause risk appetite to decline will leave the ‘Kiwi’ under pressure.

As of Wednesday, 2nd October 2019, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1222, GBP USD exchange rate was 1.2299, GBP AUD exchange rate was 1.8342, GBP NZD exchange rate was 1.9627, GBP CAD exchange rate was 1.6399, and GBP CNY exchange rate was 8.7917.
Dominic Lee About Author: (474 Posts)With over ten years experience as an economist – including four years spent as a chief economist with a major currency broker – Dominic has acquired a wealth of knowledge which he uses to forecast market movements. Dominic now works as an independent business advisor and writes for several financial publications.

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