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Pound slides as Brexit anxiety adds to economic worries

business-articlesPound slides as Brexit anxiety adds to economic worries
  • Increasing fears of no-deal Brexit drive down pound
  • Canadian dollar under pressure ahead of BOC rate decision
  • US dollar shakes off disappointing small business optimism index
 
 
Weakening UK growth limits pound appeal
 
The pound fell further out of favour yesterday in the wake of the latest comments from Conservative leadership candidate Boris Johnson.
 
As Johnson reiterated his pledge that the UK will leave the EU with or without a deal at the end of October this gave investors fresh incentive to sell out of the pound.
 
GBP exchange rates could experience further downside pressure this morning if May’s UK gross domestic product data proves underwhelming.
 
If growth in the three months to May eases to just 0.1% as forecast this would raise the odds of a weak second quarter GDP, leaving the pound exposed to additional selling pressure.
 
 
Canadian dollar braces for BOC interest rate decision
 
A mixed set of Canadian construction figures left the Canadian dollar on a weaker footing yesterday, with confidence in the wider economic outlook limited.
 
While the Bank of Canada (BOC) is not expected to change interest rates at its policy meeting this afternoon the risk of further CAD exchange rate volatility remains.
 
If policymakers demonstrate a greater willingness to cut interest rates in the months ahead this could drive the Canadian dollar lower against its rivals.
 
On the other hand, signs that the BOC will maintain a neutral policy bias could help to shore up CAD exchange rates today.
 
 
US dollar vulnerable to Fed dovishness
 
Weakening small business optimism and job openings figures were not enough to drag the US dollar down on Tuesday thanks to market risk aversion.
 
However, USD exchange rates look vulnerable ahead of the release of the Federal Open Market Committee’s (FOMC) June meeting minutes this evening.
 
Evidence of increased dovishness among Fed policymakers would support the odds of a July interest rate cut, to the detriment of the US dollar. 
 
Signs that the Fed is in less of a rush to loosen monetary policy, however, may encourage USD exchange rates to make fresh gains.
 
 
Upcoming Data:
 
Wednesday, 10th July 2019
09:30 GBP Gross Domestic Product
15:00 CAD Bank of Canada Rate Decision
19:00 USD Federal Open Market Committee Meeting Minutes
 
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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