The odds of an imminent Brexit deal continued to fluctuate sharply yesterday, leading to another day of pound volatility.
- UK political drama continues to drive pound movement
- Surprise US manufacturing weakness weighs on US dollar
- Canadian dollar shakes off underwhelming manufacturing PMI
Pound volatile before vote on Brexit bill
After the Conservative government dramatically lost its working majority in parliament the pound was able to recover most of yesterday’s losses.
However, the volatile nature of the political situation may make it difficult for GBP exchange rates to hold onto this positive footing for long.
Later this evening MPs will vote on a bill to delay Brexit, and the outcome of the vote could trigger further pound volatility.
Away from Brexit, the pound could also come under pressure if August’s UK services PMI fails to show solid growth on the month.
If the service sector falls into a state of contraction this would raise the risk of a third quarter recession, dragging GBP exchange rates lower once again.
US dollar undermined by manufacturing data
The US dollar came under pressure yesterday as a result of unexpected weakness in the ISM manufacturing index.
However, USD exchange rates could find a rallying point this afternoon if July’s trade deficit narrowed on the month.
Any improvement in US trade conditions may encourage confidence in the economic outlook, especially as US-China tensions have eased in recent days.
Neutral BOC bias forecast to boost Canadian dollar
A disappointing showing from August’s manufacturing PMI limited the strength of CAD exchange rates yesterday, with the sector contracting on the month.
However, demand for the Canadian dollar could strengthen in the wake of the Bank of Canada’s (BOC) September policy meeting.
As long as the BOC appears on course to keep interest rates at their current level for the remainder of the year the Canadian dollar is likely to benefit.
4th September 2019
09:30 GBP Services PMI
10:00 EUR Eurozone Retail Sales
13:30 USD Trade Balance
15:00 CAD Bank of Canada Rate Decision
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