Posts belonging to Category Brexit



Pound stabilises above post-election lows, political uncertainty reigns supreme

After falling in reaction to the outcome of Thursday’s general election, the pound is beginning the week in a more stable position.

After falling in reaction to the outcome of Thursday’s general election, the pound is beginning the week in a more stable position.

The GBP/USD exchange rate is also likely to stumble on Wednesday, with the Federal Reserve expected to increase interest rates at its latest policy gathering.

When PM Theresa May called for a snap election back in April her campaign hinged on the promise of maintaining strength and stability during the UK’s Brexit negotiations.

However, it’s fairly safe to say that her ability to deliver on that promise is now in question, with Thursday’s vote leaving the nation more mired in uncertainty than ever.

The Conservatives succeeded in losing their majority, a result which is unlikely to strengthen Theresa May’s hand in exit talks.

May has so far resisted calls for her resignation but the prospect of a minority government backed by the DUP is currently failing to excite much confidence in the government’s ability to secure a good deal for Britain.

While the pound has now stabilised following Friday’s sell off, it remains at multi-week and multi-month lows against the major currencies.

Wise Money markets ahead

With no potentially exciting economic reports on the calendar for today, the fallout from last week’s vote will remain the main driver of GBP exchange rate movement.

If the outcome of the election leads to the pursuit of a ‘soft Brexit’ (where the UK retains access to the single market) the pound could ultimately benefit.

However, if it appears that those members of the Conservative party pushing for a complete severing of the UK’s relationship with the EU are more likely to get their way now that May has lost her majority, the pound could be headed for new lows over the next few weeks.

In light of everything that has happened/is happening, tomorrow’s UK inflation stats may prove less influential than usual.

That being said, the pound could come under further pressure if the rate of inflation eases.

Although the odds of the Bank of England (BoE) reconsidering its current stance on interest rates are minimal (especially in the face of such political uncertainty) easing consumer price pressures would certainly add to the argument in favour of keeping borrowing costs lower for longer.

The GBP/USD exchange rate is also likely to stumble on Wednesday, with the Federal Reserve expected to increase interest rates at its latest policy gathering.

 

 

 

Pound reels as UK left with hung parliament

Is there further for the pound to fall?

Is there further for the pound to fall?

The UK took to the polls yesterday in GE2017 and it is fairly safe to say that Prime Minister Theresa May didn’t get the result she was hoping for.

The pound was left reeling as the votes were calculated and the Conservatives fell short of the 326 seats required for a majority.

The fallout from the election will be the driving force behind GBP exchange rate movement over the rest of the day.

The pound surged back in April when PM Theresa May called the snap election on the widely held belief that the Conservatives would storm their way to an increased majority.

Bets that a landslide victory would strengthen Theresa May’s hand in Brexit negotiations initially kept the pound elevated, but the currency started losing ground as a rocky campaign left her victory in doubt.

GBP exchange rates dropped 2% as last night’s exit polls pointed to a hung parliament, and this time the polls proved accurate.

While these movements are hardly as dramatic as seen following the EU referendum last year, there could be further shifts on the horizon.

With the Conservatives failing to secure the required majority, the UK’s political landscape looks murkier than ever.

If Theresa May listens to calls for her resignation the situation will be even more tenuous with only days left until Brexit negotiations are due to commence.

Wise Money markets ahead

The fallout from the election will be the driving force behind GBP exchange rate movement over the rest of the day, with any shocking announcements (like Theresa May’s resignation) having the potential to extend the pound’s losses.

However, a rapid turnaround in coalition talks and the quick establishment of a working government could help the pound recover.

Although the UK is set to publish industrial/manufacturing production, construction output, trade and growth figures, the data is unlikely to have an impact with eyes so firmly focused on the outcome of yesterday’s historic vote.

 

 

 

Little on European markets but potential big day for the GBPUSD pair

The key event of yesterday the June ECB meeting had little effect on wise money markets.

The key event of yesterday the June ECB meeting had little effect on wise money markets.

Mario Draghi continued to put emphasis on the ECB standing ready to input more Quantitative easing, if deemed necessary.

Markets had little reaction as this is considered old news at this stage and as a result, there was no major direct influence on the Euro. Most of yesterday was generally fairly quiet in terms of other Euro data, or rather lack of.

Looking at the main Euro pairs over the last 24 hours, they’ve been trading in tight ranges and only differ slightly from yesterday’s open.

This is relatively calming following the yoyo-like movements we’ve previously been seeing due to Brexit uncertainty and the changing sentiment polls.

It looks like EURUSD is on its way back down from its early May rally and most of the majors are looking a little worse off than a couple of weeks ago.

 

Wise Money awaiting US Non-Farm Payroll figures

 

Looking ahead at the dollar, today we have the US Non-Farm Payroll figures for May due for release at 13:30.

Following the Fed’s preconditions of a rate hike being dependent on a continuing improvement in the labour market, these figures are likely to be watched very closely.

If today’s figure is close to the forecast (164,000), it should strengthen expectation for a Fed rate hike through the coming summer months.

This could provide us with some upwards movement as we move into this weekend.

 

 

 

 

 

Pound rattled on new referendum poll

The pound dived sharply yesterday on the release of a new poll that showed a surprise lead for the leave camp.

 

The pound dived sharply yesterday on the release of a new poll that showed a surprise lead for the leave camp.

Over the last two weeks we have seen good momentum for the pound off the back of polls, suggesting the remain camp was pulling ahead.

However, it was almost inevitable that we would see a conflicting poll suggesting the opposite, and yesterday two Guardian/ICM polls showed a split of 52%-48% in favour of a Brexit.

The pound fell sharply against the USD and the euro on this news, and is continuing to struggle this morning. In the run up to polling day we are likely to see the pound pulled around significantly as conflicting polls and news drive price action.

Wise money news to come

Today the focus will continue to be on the Brexit momentum as we start the month of June.

In addition we have ISM manufacturing data from the US later today and sentiment is split on the momentum for manufacturing, and a weak number cannot be ruled out.
Elsewhere, we have substantial amounts of PMI data from the Euro area, France and Germany. The initial Euro area number came in slightly weaker, however Germany and France both showed good uplift.

The interest today will be in the periphery and the potential for the numbers here to be soft.

 

GBP recovers despite threat of hard Brexit

After a more than sluggish start to the week, the pound finally managed to recoup some losses on Tuesday.

After a more than sluggish start to the week, the pound finally managed to recoup some losses on Tuesday.

GBP/EUR advanced from €1.1529 to €1.1614, GBP/USD peaked at $1.3021 (up from lows of $1.2956), GBP/AUD marched from AU$1.7265 to AU$1.7431 and GBP/NZD improved from NZ$1.8418 to NZ$1.8563.

If Draghi holds with the view that the current level of stimulus is appropriate the euro could slide.

 

Wise Money market roundup

The pound’s Tuesday gains came in spite of fairly damning comments from German Finance Minister Wolfgang Schaeuble.

The German official warned that Britain ‘will learn Brexit was a mistake’ – indicating that the Eurozone’s largest economy has no intention of making the negotiations easy for the UK.

Other UK news was also less-than-inspiring, with data from the Office for National Statistics (ONS) showing that the UK borrowed significantly more than anticipated in April.

Elsewhere, the euro was supported by upbeat data for the Eurozone, including an impressive manufacturing report for the currency bloc.

The US dollar, meanwhile, fluctuated as the US services index impressed but the nation’s manufacturing equivalent fell short.

What’s coming up money wise?

The pound crept higher on Wednesday, recording modest gains against most the main currencies.

There’s nothing notable on the calendar in terms of UK data today, so any further pound movement is likely to be the result of either political developments or influence from elsewhere.

This morning’s German GfK consumer confidence result beat forecasts, edging up from 10.2 to 10.4, but its impact on the euro was minimal.

However, GBP/EUR volatility may follow today’s speech from European Central Bank (ECB) President Mario Draghi. Earlier in the week German Chancellor Angela Merkel blamed the ECB’s quantitative easing scheme for the relative weakness of the euro.

Any response Draghi makes to those remarks will be closely attended to. If Draghi holds with the view that the current level of stimulus is appropriate the euro could slide.

We also have the Bank of Canada (BOC) interest rate decision, with a cautious tone from the central bank liable to boost the GBP/CAD exchange rate.

Of course we may also see GBP/USD movement following the publication of the minutes from the Federal Reserve’s last policy meeting. Support for a rate increase in June would benefit the US dollar.

 

 

Pound gives up retail sales gains on flash crash

An upbeat UK retail sales report gave the pound a boost on Thursday, but a surprising ‘flash crash’ in the evening saw GBP give up its gains.

An upbeat UK retail sales report gave the pound a boost on Thursday, but a surprising ‘flash crash’ in the evening saw GBP give up its gains.

GBP/EUR fell from €1.1727 to €1.1627, GBP/USD dropped from $1.3041 to $1.2923, GBP/AUD tumbled from AU$1.7569 to AU$1.7380 and GBP/NZD fluctuated between NZ$1.8691 and NZ$1.8841.

Of course, with the UK general election fast approaching, political developments could take centre stage in the weeks ahead.

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Wise Money market roundup
After struggling for most of the week the pound staged an impressive rebound on Thursday thanks to a better-than-forecast set of retail sales figures for the UK.

Despite stagnant wage growth and soaring inflation, British consumers shopped until they dropped in April. Retail sales surged by 2.0% on the month and 4.5% on the year – smashing forecasts of 1.0% and 2.6%.

Although economists expect consumer spending to fall in the months ahead, the unexpected resilience in retail sales shown last month was enough to help the pound recover much of this week’s losses.

GBP/USD was also supported by the ongoing Trump scandal, with impeachment murmurs keeping the US dollar under pressure.

However, in the evening the pound experienced an unexplained reversal. The sudden GBP losses were attributed to a ‘flash crash’ and the currency remained at its lower levels on Friday.

What’s coming up money wise?

Of the economic reports due for release today, the ones most likely to inspire currency fluctuations include the Eurozone’s current account and consumer confidence figures (with positive results having the potential to boost the euro) the UK’s CBI trends total orders/trends selling prices stats and Canada’s retail sales and inflation numbers.

Next week is pretty light in terms of influential UK data, with only public borrowing and first quarter GDP stats due to have much of an impact on the pound.

A slower rate of growth in the first three months of 2017 could leave Sterling struggling.

Of course, with the UK general election fast approaching, political developments could take centre stage in the weeks ahead. The pound may be bolstered if polls show that support for the Conservatives remains strong as the general consensus appears to be that a win for Theresa May could strengthen Britain’s hand during Brexit negotiations.

 

 

 

Two US rate hikes still expected for 2017

Signs that the UK’s Brexit negotiations are going to be a bit more tempestuous than hoped have left the pound a bit despondent this week, with the currency failing to see much benefit from positive domestic data.

Signs that the UK’s Brexit negotiations are going to be a bit more tempestuous than hoped have left the pound a bit despondent this week, with the currency failing to see much benefit from positive domestic data.

In the past 24 hours the GBP/EUR exchange rate has fallen from €1.1846 to lows of €1.1799 while GBP/USD has slumped from $1.2935 to $1.2842. However, GBP/AUD has risen from AU$1.7246 to AU$1.7393 and GBP/NZD has advanced from NZ$1.8623 to NZ$1.8751.

 

Wise Money roundup

Yesterday’s UK construction PMI continued the week’s theme of better-than-forecast UK data by coming in at 53.1 in April, up from 52.2 in March. This followed hot on the heels of Tuesday’s unexpectedly strong manufacturing report.

As the construction sector contributes so little to total economic output, the result was a pleasant surprise but had little positive impact on Sterling.

In fact GBP exchange rates actually weakened on Wednesday thanks to concerns that the UK’s Brexit negotiations were already getting off to a bad start.

Accusations from Prime Minister Theresa May that Brussels was interfering in the UK election and threats of a whopping €100 billion exit bill saw the pound drift lower against the euro.

GBP/USD also fell in the wake of the Federal Reserve’s interest rate decision. While the central bank took no action at this juncture, it left the door wide open to two further rate increases over the rest of 2017.

The Fed’s statement asserted that it ‘views the slowing in growth during the first quarter as likely to be transitory.

While expectations of a June adjustment supported the US dollar, a softening in higher-risk currencies helped the pound stand firm against the Australian and New Zealand dollars.

What’s coming up?

Rumours that the Queen has called a meeting of ‘all staff’ at Buckingham Palace have been dominating headlines today, but as long as the subject of the meeting doesn’t have an economic focus the UK’s services PMI is still likely to be the main cause of pound movement today.

A hat-trick of positive results would give the pound a boost, but if the all-important services sector is shown to be struggling the pound could extend recent losses.

Eurozone retail sales data is also likely to impact the GBP/EUR pairing. As it stands, sales are believed to have stagnated on the month but risen from 1.8% to 2.1% on the year.

While better-than-expected figures could send the euro higher, gains may be limited ahead of the second round of the French election – due to take place on Sunday. Over in the US we’ve got trade balance, initial jobless claims and durable goods orders data to focus on.

 

 

 

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.