Posts belonging to Category Brexit



Euro jumps on French election results

The pound spent much of last week holding multi-month highs against the major currencies but returned from the weekend in a generally softer position.

The pound spent much of last week holding multi-month highs against the major currencies but returned from the weekend in a generally softer position.

GBP/EUR dropped from €1.1948 to €1.1790, GBP/USD dipped from $1.2854 to $1.2777, GBP/AUD slumped from AU$1.6990 to AU$1.6897 and GBP/NZD eased slightly from NZ$1.8292 to NZ$1.8177.

GBP/EUR dropped by over 1% on Monday as the euro soared in response to the outcome of the first round of the French Presidential election.

After surging on the back of optimism surrounding the UK’s snap general election, demand for the pound eased slightly on Friday following a less-than-impressive domestic retail sales report.

The data showed an unexpectedly steep slump in consumer spending in March, and some believe this heralds the beginning of the general Brexit-inspired economic slowdown predicted before the referendum.

Although pound losses were limited by hints from a Bank of England (BoE) policymaker about his plans to vote for higher borrowing costs in the near future, GBP exchange rates were left down on the week’s best levels.

GBP/EUR then dropped by over 1% on Monday as the euro soared in response to the outcome of the first round of the French Presidential election.

With centrist Emmanuel Macron and far-right Marine Le Pen making it through to the second round, and Macron expected to triumph in the second vote, the odds of France exiting the EU fell significantly. The euro jumped by over 1% against the pound, US dollar, New Zealand dollar and Swiss franc on the news.

 

Wise Money market data coming up

Today’s economic calendar highlights are German IFO business surveys, UK Confederation of British Industry (CBI) reports and Canadian wholesale sales data.

The German IFO gauges of business climate and expectations are expected to show improvement in April, while the UK’s business optimism, trends total orders and trends selling price figures are all forecast to dip.

If these predictions prove accurate the pound could extend losses against the euro as trading continues.

As last week’s Canadian inflation data fell short of the mark (leaving the Canadian dollar broadly weaker) another disappointing domestic report may help the pound recoup some of today’s losses against the ‘Loonie’.

 

Will the pound extend its election gains next week?

After an explosive start to the week pound fluctuations have been fairly minimal, with the currency managing to hold on to the multi-month highs achieved after Tuesday’s election announcement.

After an explosive start to the week pound fluctuations have been fairly minimal, with the currency managing to hold on to the multi-month highs achieved after Tuesday’s election announcement.

GBP/EUR began the week around €1.1790 and looks set to close it above €1.19, GBP/USD is up from $1.25 to $1.28, GBP/AUD is riding high at AU$1.70 (having started the week at AU$1.65) and GBP/NZD has recovered from NZ$1.78 to NZ$1.82.

The outcome of the first round of the French election will be the driving force behind shifts in the euro for much of next week.

The pound largely remained at its best levels of 2017 against all the major currencies on Thursday, with UK election expectations lending support to GBP exchange rates.

GBP/EUR was able to cling to the €1.19 level despite the euro getting a boost from a poll predicting victory for pro-EU candidate Emmanuel Macron in the upcoming French election.

Economic data had little-to-no impact on pound trading as investors fixated on the belief that June’s UK election will result in an increased majority for the Conservatives and subsequently strengthen Theresa May’s negotiating position in Brexit talks with the EU.

 

 

Wise Money market data coming up

Although election news is likely to remain one of the main catalysts for currency movement in the days and weeks ahead, there are some entries on next week’s economic calendar worth watching out for.

Pound – If concerns about the upcoming election emerge the pound has the potential to reverse this week’s gains. Sterling may also be pressured lower if upcoming reports (including the Rightmove house price index, public finance figures, the GfK consumer confidence gauge and GDP data for the first quarter) indicate that UK economic output is easing.

Euro – The outcome of the first round of the French election will be the driving force behind shifts in the euro for much of next week. If Macron dominates proceedings the common currency could climb. However, if either Le Pen or Melenchon (the anti-EU candidates) appear to have the most support, we can expect losses for EUR exchange rates.

US dollar – There are several high-impact US releases scheduled for next week, including a consumer confidence gauge, trade balance numbers, durable goods orders figures and Q1 GDP. Any reports which reduce the odds of the Federal Reserve increasing interest rates in June could send USD lower, while data supportive of higher borrowing costs would be US dollar positive.

Other – General risk sentiment will keep the Australian, New Zealand and Canadian dollars on their toes in the days ahead, but Australian inflation numbers and a speech from an RBA official also have the potential to inspire AUD fluctuations. From New Zealand we’ve got credit card spending numbers, trade balance data and the ANZ business confidence index to focus on, while CAD shifts may follow the publication of domestic retail sales and GDP numbers.

 

Sterling bounces back on service sector strength

Wednesday turned out to be pretty positive for the pound thanks to an unexpectedly upbeat UK services report.

Wednesday turned out to be pretty positive for the pound thanks to an unexpectedly upbeat UK services report.

GBP/EUR surged from €1.1645 to €1.1717, GBP/USD rebounded from $1.2439 to $1.2499 and GBP/AUD jumped from AU$1.6403 to AU$1.6539. GBP/NZD, meanwhile, struck its best levels of 2017 by advancing from NZ$1.7821 to NZ$1.7952.
Whether or not the GBP/EUR exchange rate is able to push comfortably above €1.17 largely depends on a run of speeches from ECB officials.
Yesterday’s pound gains were almost entirely driven by the UK’s services PMI from Markit.
As the services sector accounts for over 70% of total economic growth, the news that the index edged up from 53.3 to 55.0 in March was enough to send GBP exchange rates higher.
This was the strongest rise in service sector activity of the year so far, prompting this response from Duncan Brock of the Chartered Institute of Procurement & Supply; ‘Taking March in isolation, the service sector defied the slowdown experienced by construction and manufacturing firms. A stronger end to the first quarter from the biggest contributor to UK GDP will provide some relief to the UK economy as a whole, shaken and stirred by continuing highs and lows since the Brexit vote.’
The report was good enough to counteract the impact of Bank of England policymaker Gertjan Vlieghe asserting that there’s no need for UK interest rates to be increased anytime soon and the pound managed to hold gains overnight.

Wise Money market data coming up

There isn’t much happening in the UK today, so the currency market is more likely to be moved by developments in the Eurozone and US.
Whether or not the GBP/EUR exchange rate is able to push comfortably above €1.17 largely depends on a run of speeches from ECB officials.
Any references to the future path of monetary policy from ECB President Mario Draghi, Vice President Vítor Constâncio or Executive Board Member Peter Praet could inspire notable euro movement.
If the officials indicate that policy is unlikely to be adjusted for the foreseeable future, GBP/EUR could potentially advance to its best levels of the week so far.
However, any hints that either the central bank’s quantitative easing scheme could be tapered or that interest rates could rise sooner than expected would help EUR exchange rates climb before the weekend.
Over in the US we’ve got initial jobless claims and continuing claims numbers. Yesterday’s US employment report smashed forecasts and more positive jobs figures would lend the US dollar support ahead of tomorrow’s influential non-farm payrolls data.

Pound falls before Brexit begins

After riding high at the beginning of the week the pound slid against all the majors on Tuesday.

After riding high at the beginning of the week the pound slid against all the majors on Tuesday.

GBP/EUR dropped from a high of $1.1601 to a low of $1.1453 while GBP/USD tumbled from $1.2591 to $1.2383. The poundís performance against the commodity currencies was equally poor, with GBP/AUD sliding from a two-month high and the GBP/NZD exchange rate plummeting from its best levels since last December.

The pound’s impressive start to the week proved short lived and the currency racked up a number of sizable losses on Tuesday. The GBP slide was largely attributed to profit-taking, although comments from the Bank of England’s (BoE) Ian McCafferty didn’t help the situation.

The BoE policymaker indicated that the UK economy is likely to experience a gradual slowdown in the months ahead. He added that he was uncertain about when he would feel confident enough to vote to increase interest rates.

According to McCafferty, the BoE ‘will be raising interest rates and eventually reversing QE (bond purchases) as soon as the economy looks strong enough to bear it. I think the economy is strengthening slightly over the course of last year and into the early part of this year. Whether it stays as strong is still very much an open question, because we are seeing inflation starting to pick up.’

The GBP/USD exchange rate also fell as the US dollar was supported by an impressive US consumer confidence score while GBP/CAD declined in the face of surging oil prices.

What’s coming up?

Today it’s all about Brexit, and the official start of the UK’s two year negotiations with the EU. Prime Minister Theresa May is set to activate Article 50 of the Lisbon Treaty at lunchtime today.

According to Lloyds Bank; ‘The Article 50 letter, signed by PM May, will be hand delivered by Sir Tim Barrow, the UK’s permanent representative in Brussels, to EU Council President Donald Tusk. – The contents of the letter will be examined for any differences with Mrs Mayís Lancaster House speech in January which detailed the government’s negotiating objectives, including the future trading relationship with the EU.’

While the pound could extend yesterday’s losses once Article 50 is activated, some economists believe the event has been so long anticipated that GBP exchange rates could actually climb on the news.

Sterling’s long-term outlook is a little less certain however. The tone of the initial Brexit negotiations will be crucial. If it appears that the EU is unlikely to make many concessions (or if it looks as though PM May will be pursuing a so-called ‘hard Brexit’) we may see the pound give up the advances itís made over the past few months.

Trump worries send GBP higher, Scottish vote ahead

The pound enjoyed a day of pretty solid gains at the start of the week.

The pound enjoyed a day of pretty solid gains at the start of the week.

With the currency rising to an almost two month high against the US dollar while recording its best level against the Canadian dollar since December. GBP/AUD also marched to its highest rate since February, although the poundís gains against the euro were more muted.

GBP/EUR spent the day fluctuating between ‘1.1467 and ‘1.1615, GBP/USD advanced from a low of $1.2365 to a high of $1.2612 and GBP/CAD stormed to a high of C$1.6872.

Whatís been happening?

Yesterday the pound managed to romp higher against most of its currency rivals despite a lack of juicy UK data. The currencyís gains were largely in reaction to developments in the US, with a lack of confidence in President Trumpís abilities to push through economic policies triggering heavy US dollar losses.

Comments from Fed policymaker Charles Evans also kept the US dollar under pressure. Although the Federal Reserve Bank of Chicago President indicated that he still envisages three rate hikes taking place this year, he added that two may be appropriate if the current inflation uncertainty persists.

Meanwhile, upbeat German IFO surveys limited the poundís gains against the euro, with German business morale hitting its best level for almost six years.

What’s coming up?

Today the Scottish government is expected to vote in favour of making a request to Westminster for a second independence referendum. Yesterday Prime Minister Theresa May visited Scotland in order to urge Scottish voters to keep Britain unified, asserting that (with Brexit negotiations about to kick off) now is not the time for more discord.

If the Scottish government does vote in favour of pushing forward with referendum plans, the pound could register modest losses later today.

GBP exchange rates may also start giving up their recent gains ahead of tomorrow and the much-anticipated activation of Article 50.

There’s no UK data on the calendar today, but there are US trade balance and consumer confidence figures to look out for. Speeches from various Fed officials (including Chairwoman Janet Yellen) will also be drawing focus, with any interest rate-related remarks having the potential to either send the US dollar lower still or help it recover ground.

Additionally, the GBP/CAD exchange rate could move away from its recent highs if Bank of Canada Governor Stephen Poloz adopts an optimistic tone in todayís speech.

Pound steady as Article 50 trigger date approaches

Although we’re now only six days away from the long-awaited activation of Article 50, the pound is proving resilient and its best levels of the week could be yet to come.

Although we’re now only six days away from the long-awaited activation of Article 50, the pound is proving resilient and its best levels of the week could be yet to come.

Sterling edged slightly lower yesterday as excitement over the inflation surge eased. However, GBP largely returned to opening levels before the close of the European session despite the UK being shaken by a terror attack in London.

GBP/EUR was holding ‘1.1546, GBP/USD remained close to $1.2500 and GBP/AUD held firm above AU$1.6250.

What’s been happening?

After the flurry of activity inspired by the UK’s inflation report earlier in the week, trading was a little flat on Wednesday.

A lack of high-profile data prevented the pound advancing further as the eyes of the world turned to the shocking events that took place outside the Parliamentary building in London.

Meanwhile, the decline in bets that the Federal Reserve will increase interest rates more than three times in 2017 weakened demand for the US dollar and the euro failed to display much response to a 15-month low Eurozone current account surplus.

Down in the South Pacific, the Reserve Bank of New Zealand (RBNZ) left interest rates on hold as expected. The central bankís policy statement was little changed from February, although it did seem slightly less concerned about the relative strength of the New Zealand dollar. The upshot of the announcement was that the GBP/NZD exchange rate got to hold its previous 2 cent gain.

What’s coming up?

Aside from the UK retail sales numbers, we have a speech from Fed Chairwoman Janet Yellen and Eurozone consumer confidence data on the calendar for today.

The pound could hit its highest levels of the week so far if the UK sales report shows the forecast uptick in consumer spending, but the recent terror incident may limit demand for the British currency. The pound is also liable to start feeling the pressure ahead of the weekend with the activation of Article 50 in sight.

Looking ahead to Friday weíve got a number of reports for the Eurozone to focus on.

Sturdy PMIs for the currency bloc and its major economies would be euro supportive. The only UK news will be the BBA loans for house purchase stat, which is expected to detail an increase in property lending.

As we’ve also got Canadian inflation data and US durable goods orders due for publication, USD and CAD exchange rates could be in for some movement.

Article 50 activation date sends pound lower

Although the pound began the week on a bit of a high, the currency experienced a prompt reversal of fortunes as the official date for the activation of Article 50 was announced.

Although the pound began the week on a bit of a high, the currency experienced a prompt reversal of fortunes as the official date for the activation of Article 50 was announced.

The news that Article 50 would be triggered on March 29th saw the GBP/EUR exchange rate fall from a high of  ‘1.1548 to a low of  ‘1.1476. GBP/USD also lost more than 0.3% to slide to 1.2333 while both the GBP/AUD and GBP/NZD exchange rates slumped by over 0.7%.

Wise Money Markets Roundup

Prime Minister Theresa May’s plans to activate Article 50 before the end of March have been hitting headlines for quite some time. As itís been on the horizon for a while, some industry experts had predicted that the impact of the event on the pound would be minimal. While that didn’t stop Sterling falling when the date was confirmed on Monday, the currency could recover its knee-jerk losses over the rest of the week.

Economic data was in pretty short supply on Monday, with the UK Rightmove House Price index coming in at 1.3% month-on-month and 2.3% year-on-year. German producer price data fell short of forecasts, but the report had little impact on the euro as investors instead focused on the results of the latest polls for the French election. Current forecasts put the odds of right-wing candidate Marine Le Pen winning the first round of the process at 26% (neck-and-neck with closest rival Emmanuel Macron).

Currency Forecast

Although Article 50 is likely to remain in the spotlight over the week ahead, this weekís UK inflation data and retail sales figures could help the pound return to its recent highs against peers like the euro, US dollar, Australian dollar and New Zealand dollar.

If today’s inflation data confirms that the annual Consumer Price Index pushed above the Bank of Englandís (BoE) 2% target in February, it would increase the pressure on the central bank to raise interest rates – potentially boosting the pound in the process.

Similarly, this week’s domestic retail sales numbers are expected to show a rise in year-on-year consumer spending and could lend the pound further support if the estimates prove accurate.

However, if either of these reports miss the mark, we may see the poundís decline continue in the build up to March 29th.

Other economic reports to focus on today include Canadaís retail sales data and Australiaís leading index.

Plan B for Article 50

Theresa May suffered a setback, as the House of Lords voted against changes to Article 50 Bill.

Theresa May suffered a setback, as the House of Lords voted against changes to Article 50 Bill.

The same Bill had passed through the House of Commons with little restrain, which had been expected to happen this time also. Theresa May, may now need a plan B for triggering Article 50 within the month of March, as the debate on EU nationals living in the UK doesnít appear to be any closer to striking an agreement.

Increase of UK house buyers

According to the figures published on Wednesday, UK House prices for January to February grew at a sluggish 0.6%, and 4.3% for the same period a year ago. Average house prices are now just under £206,000, which is up by just a bit less £700 from the same period last year. The number of house buyers has raised to around 11 for each household available, making it increasingly difficult for buyers to find their ideal home. Even though mortgage lending is still at significant lows, first time buyers, especially, are having to put down more deposits to meet with house price increases.

Investors left settled after Trumpís speech

US Stock Markets continued to rally after Donald Trump spoke to Congress, with the President toning down his usual Gung-Ho approach. The way Donald Trump led himself through the meeting left investors more settled, which hasn’t always been the case in his short period in charge of the biggest economy in the world. In other news, the Federal Reserve are expected to raise interest rates after a bright start to the economic year, with the first hike expected within the next 2-3 meetings.

Data to come

Today’s data from the EU could swing the FX Market, as Consumer Price index figures are out this morning, and are expected to be slightly higher for February year-on-year, with 1.9% against a previous 1.8%. We also have Swiss Gross Domestic Product to view, as well as Canadian Gross Domestic Product. Japanese Consumer Price Index numbers for January year-on-year are also expected to be slightly better off at 0.4% against a previous reading of 0.3%.

Markets focus on a possible rate hike

The US Dollar is slightly weaker on the pound as the markets have reacted to Donald Trump’s congress speech.

The US Dollar is slightly weaker on the pound as the markets have reacted to Donald Trump's congress speech.

This reaction was fairly limited and markets are instead focusing on significantly higher risks of a rate rise by the Fed at the 14-15 March meeting, especially after the comments from New York Fed President, Dudley, that the case for tightening ìhas become a lot more compellingî. As a result, there could be some market volatility on the dollar in the coming weeks, while investors look to take their positions.

Anti-climax of Trump’s speech

US President eagerly awaited speech was a slight anti-climax as he offered an uncharacteristic upbeat theme that sought to calm his opponents. Despite delivering an address which had a familiar ‘America First’ theme throughout, similar to that of his inaugural speech, there was more of a presidential tone which could be a sign that he is trying to be more diplomatic in his firm approaches. Furthermore, Mr Trump reconfirmed that he intends to repeal and replace Obamacare, increase defence spending, enforce immigration laws and also overhaul tax including cuts for the middle class.

Today’s data

Most of the day will be spent deciphering Mr Trump’s speech with some potential volatility later in the day. Data wise, we’ll have the German provisional CPI (exp 0.6%mm, 2.1%yy) and Unemployment (exp -10K, 5.9%) for January and the US Personal Consumption/Expenditure figures. The Construction Spending and Total Vehicle Sales are also due, as well as Fed speeches from Kaplan and Brainard, late in the day.

Trump’s address to Congress attracts market attention

Tonight Donald Trump will be addressing Congress and this will attract the attention of the markets, as previously Trump has promised to announce ‘something phenomenal’ in relation to tax.

Tonight Donald Trump will be addressing Congress and this will attract the attention of the markets, as previously Trump has promised to announce 'something phenomenal' in relation to tax.

 

Tonight we may find out some of the detail on the tax plans and this could lead to volatility in the USD. Looking further ahead it could help to form sentiment on monetary policy as the federal Reserve are also sitting on their hands until they get clarity on the economic plans from the Trump administration.

The Trump trade which is a focus on reflation could come back into play after losing some momentum recently, and there is a small possibility that the Fed could still look at March for a rate hike. The Federal Reserve will also be awaiting key PCE inflation data tomorrow to give further guidance. Today we also have US GDP for the last quarter of 2016 to digest so lots of US news to focus on.

Second Scottish referendum speculation

The pound has been under pressure in the markets following renewed speculation over whether Scotland would be allowed a second referendum on independence, following the withdrawal of the UK from the EU. This essentially creates a new uncertainty compounding the uncertainty of Brexit itself, and hence it has weighed on the pound. The Article 50 bill is currently passing through the House of Lords with the potential for amendments to the bill.

Euro’s ups and downs

The euro is trying to hold its head above the water and has been helped by feedback from yesterday’s EC economic sentiment survey which backed up recent stronger PMI’s from Europe. The euro is still facing political headwinds from looming elections in France and later in the year Germany. The euro is also at risk of Trump delivering aggressive tax plans as this could catalyse a move lower in EUR/USD.