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EU Summit could boost pound exchange rates

business-articlesEU Summit could boost pound exchange rates
  • EU leaders to vote on Brexit
  • Senate to compromise on tax reform?
  • USD could dip if US industrial production slows
EU leaders set to vote on Brexit trade talks

EU leaders will conclude a two-day summit in Brussels later today and announce whether enough progress has been made in Brexit talks to allow negotiations to move on to the second stage, with the pound edging higher on hopes that the summit will end positively.

The UK government is confident that the other EU members will vote for second stage talks to move forward after Theresa May was able to strike a last minute deal with the EU last week to finalise the UK’s exit agreement.

This sentiment also appears to be shared by European Council President Donald Tusk. As he arrived in Brussels yesterday he said, ‘Tomorrow we will end formally our first phase of the Brexit negotiations.’

However, while this development could give Sterling a little lift, the second stage of talks are likely to be even more difficult than the first as the two sides negotiate their future relationship.

Further changes to be made to US tax reforms?

USD exchange rates are coming under fire this morning as investors become increasingly sceptical over the chances of US tax reforms being passed ahead of an expected final vote next week.

This follows Florida senator Marco Rubio’s objection to the current tax proposals as he said he would not support the current bill unless there were changes to child tax credits.

With the Republican Party reduced to the slimmest majority possible in the Senate after losing the seat in Alabama earlier this week, there is now little room for dissent, with the loss of any more than two votes likely to derail the bill.

To try and prevent this the party is expected to put forth a compromise plan later today, with movement in the US dollar likely to be tied closely to the reaction among Republicans.

US industrial production expected to have slowed in November

The US dollar may also find itself retreating this afternoon as the US publishes its latest industrial production figures.

After surging to 0.9% in October as factories sought to catch up on the disruption caused by both Hurricanes Harvey and Irma, economists forecast that factory output growth will have slowed to 0.3% this month as operations normalise once again.

This would place industrial production growth back in line with the long term average, which is around 0.28%.
However, a better than expected reading could prompt the US dollar to rally, with even a slight increase likely to lead to the fourth quarter seeing the fastest pace of growth in 2017.

Upcoming Data

Friday, 15th December 2017

10:00               EUR Eurozone trade balance
12:00               GBP Bank of England quarterly bulletin
14:15               USD industrial production 
Philip McHugh

Philip McHugh

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)

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