A renewed sense of political anxiety gripped the pound ahead of the weekend as the Conservative leadership contest came down to its final two candidates.
- Prospect of Brexit progress shores up pound
- Canadian dollar weakens ahead of business confidence index
- US dollar looks for rally on consumer credit figure
Hopes of Brexit breakthrough fuel pound gains
After Labour and the Conservatives suffered a significant knockback at last week’s local elections markets were encouraged to bet on the prospect of an imminent Brexit breakthrough.
With both the major political parties under pressure investors see a greater likelihood of the two sides agreeing a Brexit compromise, pushing the pound higher across the board.
However, if discussions fail to make any significant progress this could see the mood towards the pound sour again in the days ahead.
In the absence of any fresh UK data, other than house price figures from Halifax, the potential for further GBP exchange rate gains appears limited in the near term.
Canadian dollar vulnerable to weakening business confidence
The weakness of last week’s run of Canadian economic data left CAD exchange rates under pressure, with confidence in the domestic outlook declining.
This afternoon’s Ivey PMI could add to the bearish mood of the Canadian dollar if the index slumps on the month as forecast.
A fresh decline in domestic business confidence would appear to raise the risk of Bank of Canada (BoC) dovishness, leaving the Canadian dollar on the back foot.
An upside surprise, though, could see CAD exchange rates recovering some of the previous week’s losses.
Rising consumer credit may offer US dollar boost
Friday’s surprise fall in the US unemployment rate failed to give the US dollar a boost, as investors instead reacted to disappointing wage growth and the decline in the participation rate.
Confidence in the underlying health of the world’s largest economy remains somewhat muted as trade tensions with the EU and China continue to weigh on growth.
Even so, this afternoon’s US consumer credit data could offer USD exchange rates a boost if the figure shows an increase on the month.
As higher levels of consumer credit translate into stronger retail sales and domestic confidence a strong showing here could help the US dollar to return to a positive footing.
Tuesday, 7th May 2019
15:00 CAD Ivey PMI
20:00 USD Consumer Credit
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)