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Pound hits fresh five-month highs on hopes of imminent Brexit deal

business-articlesPound hits fresh five-month highs on hopes of imminent Brexit deal
  • Bets of imminent Brexit deal bolster pound
  • Narrowed Eurozone trade surplus undermines Euro 
  • US dollar shakes off retail sales disappointment
 
Weaker UK retail sales may dampen pound optimism
 
The odds of an imminent Brexit deal continued to fluctuate sharply yesterday, leading to another day of pound volatility.
 
GBP exchange rates were initially able to strengthen to fresh multi-month highs as official sources suggested that Boris Johnson had conceded on the Irish border issue, but the currency later fell back as the DUP stated that they can’t support Johnson’s deal as it stands. 
 
Demand for the pound could falter this morning as forecasts point towards another monthly contraction in retail sales.
 
Evidence of deteriorating confidence among UK consumers may weigh on GBP exchange rates as fears of a potential economic slowdown linger, even in the face of the latest Brexit developments.
 
 
Euro looks for boost on Eurozone construction surge
 
As the Eurozone trade surplus narrowed further than forecast in August this limited the upside potential of the euro.
 
But while the surplus narrowed from 24.8 billion to 14.7 billion, EUR exchange rates still found some support thanks to a general weakening in market risk appetite.
 
The single currency could gain later if August’s Eurozone construction output strengthens as forecast. 
 
With forecasts pointing towards a 2.6% leap in construction worries over the outlook of the Eurozone economy could ease this morning.
 
 
USD exchange rates to falter on signs of manufacturing weakness
 
Although US retail sales delivered an unexpected contraction on the month USD exchange rates held onto a positive footing yesterday afternoon.
 
Signs of deteriorating US-China relations helped to keep the safe-haven US Dollar on an uptrend, with markets wary of the potential for last week’s trade agreement to fall through.
 
Worries over the outlook of the world’s largest economy could mount further, however, if October’s Philadelphia Fed manufacturing index declines on the month.
 
Fresh evidence of weakness within the manufacturing sector would increase the risk of a third quarter slowdown, giving the Federal Reserve greater incentive to cut interest rates this month.
 
 
Upcoming Data:
 
Thursday, 17th October 2019
09:30 GBP Retail Sales
10:00 EUR Eurozone Construction Output
13:30 USD Philadelphia Fed Manufacturing 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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