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British Pound Gains versus Most Majors as Hopes Rise for Optimism in Brexit Negotiations

Published: 7 Sep at 2 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, China, Germany, Ireland, Japan,

Pound Sterling (GBP)
Acceleration in Brexit negotiations could be just what the Pound needs to mount a more solid recovery, as the British currency recovered some of its recent losses versus most majors thanks to the past week’s Brexit developments.

EU Chief Negotiator Michel Barnier took an optimistic tone about the UK and EU’s future relationship on Friday, saying the EU was open to alternative backstop plans for the issue of the Irish border and indicating the EU would still rather avoid a ‘no-deal Brexit scenario too. This sent the Pound surging briefly.

If UK and EU negotiators continue to show optimism, the Pound may be in for further gains in the coming week. Still, Monday’s UK growth rate, Tuesday’s UK job stats and Thursday’s Bank of England (BoE) policy decision could prove highly influential too.

Euro (EUR)
The Euro’s strength was driven mostly by the strength of its rivals like the Pound (GBP) and US Dollar (USD) last week, as the Eurozone’s latest data was not strong enough to offer the shared currency fresh support.

The Eurozone’s composite PMI data beat forecasts, but indicated that business optimism was falling and may point towards weaker Eurozone growth in the coming quarters. Germany’s latest factory and trade data disappointed too, worsening concerns that the Eurozone’s economy could be negatively impacted by US trade protectionism.

The European Central Bank’s (ECB) September policy decision is most likely to influence the Euro’s movement next week, but Eurozone employment and German inflation stats could prove influential too.

US Dollar (USD)
While markets were driven by demand for safe haven currencies like the US Dollar earlier in the week, the US Dollar’s bullishness softened towards the end of the week. This allowed the Pound to US Dollar exchange rate to recover more easily.

Concerns that the US could soon take more protectionist stances on US-Japan trade too made the US Dollar less appealing on Friday. The latest US factory data fell short of forecasts too. However, strong US job stats and wage growth helped the US Dollar to avoid further losses versus a strong Pound on Friday.

Risk-sentiment and US trade developments will remain in focus for US Dollar investors next week, but Thursday’s US Consumer Price Index (CPI) inflation rate figures could be influential too.

Australian Dollar (AUD)
Deepening concerns about US trade protectionism, as well as a broad selloff in emerging market currencies, left investors hesitant to buy relatively risky trade-correlated currencies like the Australian Dollar last week.

Despite some decent Australian data throughout the week, the Australian Dollar remained pressured by risk-off sentiment, especially with markets once again concerned about an escalating US-China trade war.

Australian confidence data will be published next week, as will the latest Australian job market stats. However, even if these impress, risk-off movement in markets could keep continued pressure on the Australian Dollar.

New Zealand Dollar (NZD)
US-China trade war jitters have left investors with little reason to buy the risky trade-correlated New Zealand Dollar.

On top of this, strong Australian data left its rival, the Australian Dollar, the more appealing of the two throughout the week. This made it easier for the Pound to New Zealand Dollar exchange rate to climb.

As New Zealand has strong trade ties with both China and the US, further escalating trade protectionism from the US could keep the New Zealand Dollar unappealing – though the NZ business PMI could prove influential next Friday.

Canadian Dollar (CAD)
The Pound to Canadian Dollar exchange rate climbed higher throughout the last week, as uncertainties about North American Free Trade Agreement (NAFTA) renegotiations limited the Canadian Dollar’s strength.

On top of this, the Bank of Canada (BoC) said in its September policy decision that it was hesitant to act on monetary policy until more clarity had been offered on US-Canada trade relations. Canada’s latest manufacturing data was disappointing too.

Canada’s economic calendar will be quiet next week, so the Canadian Dollar is most likely to react to developments in US-Canada trade talks.
As of Friday, 7th September 2018, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1173, GBP USD exchange rate was 1.2918, GBP AUD exchange rate was 1.8171, GBP NZD exchange rate was 1.9761, GBP CAD exchange rate was 1.7009, GBP CNY exchange rate was 8.841, and GBP JPY exchange rate was 143.3933.
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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