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Pound falls as UK-France row escalates

currency-newsPound falls as UK-France row escalates
The pound slipped on Monday, falling below €1.18 against the euro as UK-France tensions rose and data revealed UK factory output slowed.

Meanwhile, the pound is lacking direction so far this morning, with GBP/EUR flat at €1.1770 and GBP/USD muted at $1.3654. GBP/AUD is surging higher at AU$1.8278, while GBP/CAD and GBP/NZD are steady at C$1.6926 and NZ$1.9037, respectively.

Looking ahead, will finalised Eurozone manufacturing data help EUR extend its gains this morning?


What’s been happening?

The pound weakened yesterday, falling sharply against the euro as the row over post-Brexit fishing rights between the UK and France escalated.

While talks between the two sides continue, France has since delayed sanctions against the UK, who had threatened legal action, sparking wider fears over trade and economic harm.

Meanwhile, finalised UK manufacturing PMI data for October also dented Sterling despite a better-than-expected 57.8 reading, up on September’s seven-month low of 57.1. The survey showed supply chain problems caused factory output to slow, with new export orders falling for a second month.

The US dollar slipped on Monday after the ISM manufacturing PMI revealed growth in the sector slowed in October, while also showing new order growth hit a 16-month low.

Softening US Treasury yields amid an equity market rally also weighed on the US dollar through Monday’s session.

The euro benefitted from its negative correlation with USD at the start of the week, making solid gains despite German retail sales contracting -2.5% in September, coming in below forecast of 0.6% growth.


What’s coming up?

The focus for EUR investors today will be the finalised Eurozone manufacturing PMI for October, which is forecast to show a slight slowdown in activity from September.

In the absence of significant data releases today, the pound may remain sensitive to developments in the UK-France fishing row, and talks on the Northern Ireland protocol ahead of the Bank of England (BoE) interest rate decision on Thursday.

Ahead of high-impact US data and the Federal Reserve interest rate decision announcement tomorrow, the safe-haven US dollar looks set to be driven by shifting market risk appetite.
 
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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