Trade in the pound was mixed on Monday, with easing fears of a no-confidence vote being offset by Theresa May’s rejection of an extension to the Brexit transition period.
Sterling looks to be consolidating these gains this morning, with GBP/EUR stable at €1.1452, GBP/USD steady $1.3077 and GBP/CAD buoyant at C$1.7151, while GBP/AUD and GBP/NZD remain flat at AU$1.8095 and NZ$1.9607 respectively.
Looking to today’s session, the US midterm elections look set to dominate the attention of investors, potentially softening the US dollar as political uncertainty reaches fever pitch.
What’s been happening?
Brexit was back in the spotlight at the start of this week, with the pound gaining against the majority of its currency peers on Monday as reports emerged of a ‘secret’ Brexit deal.
According to the Sunday Times, Theresa May secured an agreement with Brussels to remain in a temporary customs union with the EU after Brexit, a deal which could help to avoid a hard border in Ireland and was seen as GBP positive.
However slightly dampening these gains was the release of the UK’s latest services PMI, with growth in the UK’s service sector shown to have slowed to a seven month low in October and raising concerns over a possible slump in GDP in the fourth quarter.
This jump in the pound saw the GBP/EUR exchange rate breakthrough and stabilise at €1.14, with the euro unable to stave off Sterling’s advance as Italy’s ongoing budget drama remained centre stage for EUR investors, causing many to shy away from single currency.
Meanwhile the GBP/USD exchange rate leapt around half a cent on Monday as investors limited their positions in the US dollar in the run-up to the US midterms.
What’s coming up?
US political developments are likely to be a major source for currency movement today as the Republican Party’s control of the US senate looks to be tested.
This is likely to see the US dollar remain vulnerable throughout much of Tuesday’s session over fear that a major swing in favour of the Democrats may limit Trump’s ability to pass his economic reforms.
Meanwhile the absence of any notable UK data will see Brexit remain as the main catalyst for movement in the pound, with GBP exchange rates likely to continue to climb if headlines remain positive.
Finally the euro could struggle this morning following the release of the Eurozone’s final services PMI for October if it is revised down similarly to the manufacturing PMI.
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)