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Fri 19 Jul 2024 13:46GMT

British Pound Weakened by Brexit Jitters as Euro Surges on European Central Bank Speculation

Published: 7 Jun at 4 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, Germany, Ireland, Italy,

Pound Sterling (GBP)
This week has seen the Pound put in a mixed performance against major rivals. While it was supported against some other currencies due to solid UK services data, Brexit jitters have been enough to drag it lower against others.

On Thursday, fresh Brexit uncertainties left the Pound unappealing, preventing it from gaining even against its weaker rivals. Investors became concerned that divisions over how to handle the issue of the Irish border had worsened UK government fissures between soft Brexit and hard Brexit supporters.

The Pound may be influenced by Friday’s UK growth estimate from NIESR if it impresses investors. Failing that though, Sterling trade could remain limp until next week, when UK inflation and unemployment data will be published.

Euro (EUR)
Lightening Eurozone political jitters and European Central Bank (ECB) speculation have kept the Euro appealing this week, following weeks of weaker trade on mixed data and Italian political uncertainties.

On Wednesday, the ECB’s Chief Economist indicated that the bank was still planning to withdraw its quantitative easing (QE) scheme sometime this year. This boosted market hopes that the ECB was not worried about political jitters affecting the economic outlook, and left the Euro in higher demand.

Friday will see the publication of Germany’s April trade and production results, but if these don’t influence Euro trade investors will look ahead to next week’s key European Central Bank policy decision and the Eurozone’s May inflation results.

US Dollar (USD)
As investors sold the US Dollar from its highs and the currency’s recent rally drew to an end, the Pound to US Dollar exchange rate has advanced slightly this week. Investors have also found the US currency less appealing due to the Federal Reserve’s neutral stance on monetary policy – disappointing traders hoping for four US interest rate hikes this year.

US Dollar demand has continued to slip this week, despite some solid US ecostats. US trade data beast expectations on Wednesday. However, US Non-Farm productivity was weaker than expected in Q1.

Friday’s US wholesale inventories may give the US Dollar some late-week support if it impresses, but the currency is unlikely to start rallying again unless new US data or Federal Reserve comments bolster the US economic outlook notably. The focus for the US Dollar next week will be the Federal Reserve’s June policy decision.

Australian Dollar (AUD)
Despite global trade concerns weighing heavily on market demand for risky trade-correlated currencies like the Australian Dollar, the Pound to Australian Dollar exchange rate has been unable to hold its ground this week.

The Australian Dollar has been boosted by Australian data – first an impressive retail sales report on Monday, followed by stronger than expected Australian growth results on Wednesday. The ‘Aussie’ was weighed slightly by fresh trade jitters on Thursday however, as Australia’s April trade balance results fell short of expectations.

More notable Australian ecostats will be published next week, including NAB’s business confidence survey on Tuesday, Westpac’s consumer confidence survey on Wednesday and Australia’s May job market results on Thursday.

New Zealand Dollar (NZD)
The Pound to New Zealand Dollar exchange rate has performed similarly to GBP/AUD this week, despite a lack of supportive New Zealand ecostats published in recent sessions.

Strength in the Australian Dollar and a weaker US Dollar helped the New Zealand Dollar to hold its ground against a weak Pound this week. This is despite falling prices of dairy, New Zealand’s most lucrative commodity.

NZD trade could be a little more heavily influenced by data next week, as New Zealand’s May business PMI will be published on Friday. Failing that though, global trade developments and US Dollar strength will influence the New Zealand Dollar.

Canadian Dollar (CAD)
Sterling has been able to advance against the Canadian Dollar so far this week, as investors remain anxious about the lack of progress in North American Free Trade Agreement (NAFTA) renegotiations lately.

Markets are concerned that NAFTA talks could run well into 2019, or that the deal may collapse altogether, due to recent deadlocks in talks. This has kept pressure on the Canadian Dollar, despite this week’s Canadian data being largely optimistic.

Friday will see the publication of Canada’s anticipated May job market results. However, if the report does not surprise investors or influence Canadian Dollar trade, investors will continue to focus on US trade developments instead.
As of Thursday, 7th June 2018, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1375, GBP USD exchange rate was 1.3422, GBP AUD exchange rate was 1.7603, GBP NZD exchange rate was 1.9104, and GBP CAD exchange rate was 1.7411.
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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