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Fading Brexit optimism leaves pound vulnerable

business-articlesFading Brexit optimism leaves pound vulnerable
  • Pound slips from highs as Brexit optimism falters
  • Eurozone industrial production decline weighs on euro
  • New Zealand dollar under pressure after disappointing Chinese trade data
Wage growth disappointment to add to pound losses? 
 
As the latest round of Brexit talks failed to deliver a significant breakthrough, GBP exchange rates shed some of last week’s gains.
 
With the Irish border issue still unresolved investors struggled to maintain their optimism, leaving the pound vulnerable to selling pressure.
 
The mood towards the pound could sour further this morning as forecasts point towards an easing in August’s average weekly earnings figures.
 
Evidence that UK wage growth is losing its momentum would add to existing worries over the strength of the economic outlook, with household spending already under pressure thanks to political anxiety.
 
 
Fresh signs of slowing Eurozone economy drag on euro
 
Confidence in the underlying health of the Eurozone economy diminished in the wake of August’s industrial production data, which showed another sharp contraction.
 
EUR exchange rates could suffer a further decline today thanks to the latest ZEW Eurozone and German economic sentiment indexes.
 
With the indexes expected to slide deeper into negative territory, support for the single currency seems unlikely to pick up.
 
 
New Zealand dollar on the back foot ahead of inflation data
 
A general deterioration in market risk appetite put the New Zealand dollar under pressure at the start of the week as Chinese trade data proved underwhelming.
 
Further weakness may be in store for NZD exchange rates this evening with the release of the third quarter New Zealand consumer price index.
 
Markets expect to see the headline inflation rate falter on the year, dipping from 1.7% to 1.4% and falling further away from the Reserve Bank of New Zealand’s (RBNZ) inflation target.
 
As a weaker inflation reading could encourage RBNZ policymakers to consider cutting interest rates again sooner rather than later demand for the New Zealand dollar looks set to decline.
 
 
Upcoming Data:
 
Tuesday, 15th October 2019
09:30 GBP Average Weekly Earnings
10:00 EUR ZEW Economic Sentiment Index
22:45 NZD Consumer Price Index
 
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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