Brexit jitters look set to keep the pound under pressure for the foreseeable future as investors continue to weigh up the odds of the UK leaving the EU without a deal.
- Weaker non-manufacturing composite could drag US dollar lower
- Canadian dollar looks for rally on business confidence
- UK politics continue to drive pound
US dollar vulnerable to signs of weaker economic growth
As forecasts point towards a modest weakening in the ISM non-manufacturing composite index the US dollar could come under pressure this afternoon.
Any signs of weakening economic momentum may leave USD exchange rates on a weaker footing, with softness likely to encourage greater Federal Reserve caution.
A widening of October’s trade deficit may help to shore up the US dollar, however, as this would fuel the Trump administration’s protectionist tendencies.
While the prospect of further trade tariffs is not particularly positive for the domestic outlook this could still give USD exchange rates a boost.
Could stronger business confidence boost Canadian dollar?
The Canadian dollar slumped sharply in the wake of the Bank of Canada’s (BOC) decision to leave interest rates on hold, in spite of markets having anticipated this lack of movement.
With confidence in the Canadian economy generally limited CAD exchange rates look vulnerable to further losses this afternoon if the Ivey PMI fails to push higher.
Evidence of resilient business confidence would give investors fresh incentive to buy into the Canadian Dollar, even in the wake of recent disappointing data.
A continued recovery in oil prices may also help to limit the downside bias of CAD exchange rates in the near term.
Brexit speculation to drive further pound movement
Even in the absence of any fresh UK data the pound could see further volatility today, as MPs continue to debate Theresa May’s Brexit deal.
If the odds of the plan being voted down next week continue to mount this would leave the pound exposed to selling pressure.
The greater the lack of support for May’s Brexit proposal the more pressure GBP exchange rates are likely to come under.
However, unless markets see an increasing likelihood of the UK leaving the EU without any deal in place any pound losses should prove limited.
Thursday, 6th December 2018
13:30 USD Trade Balance
15:00 CAD Ivey PMI
15:00 USD ISM Non-Manufacturing Composite Index
21:30 AUD Construction PMI
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)