Pound slides as Juncker slams UK’s Brexit position papers

Jean-Claude Juncker claimed yesterday that none of the UK government’s Brexit positioning papers was satisfactory, tipping the pound into a sharp decline across the board.

Sterling remains soft this morning, with GBP/EUR still around an eight-year low at €1.0798, although GBP/USD remains near a two-week high at US$1.2905. GBP/AUD has fallen to AU$1.6203, while GBP/NZD is stuck at NZ$1.7804, and GBP/CAD at C$1.6170.

Today’s UK consumer credit figures could cause some fresh worries over the extent of household indebtedness, but read on to find out which top tier data from the Eurozone and US will be the real driver of GBP/EUR and GBP/USD exchange rates today…

What’s been happening?

The pound slumped against its major peers yesterday after European Commission President Jean-Claude Juncker claimed the UK’s Brexit plan was unsatisfactory. After months of waiting for clarity, the EU and the markets both received some more direction from No.10 after the government published five Brexit papers.

However, Juncker claimed there was much work to be done and that the opening papers were lacking. This caused unease ahead of the resumption of negotiations this week, keeping GBP/EUR on the decline.

The euro was largely on the rise, as markets were looking for a measure of safety given the resurging geopolitical tensions surrounding North Korea. On Monday night North Korea fired a missile over Japanese airspace, causing panic on the markets. The White House responded with a statement claiming that all options were on the table.

Resurging tensions between the US and North Korea understandably cut appetite for USD. Sentiment towards the US dollar was weakened even further by Storm Harvey, which has caused huge amounts of damage in Texas. One estimate claims the total cost of the damage could reach US$100 billion.

This allowed GBP/USD to just about hold on to opening levels versus USD; the pound had made early gains, but an against-forecast rise in US consumer confidence to 122.9 gave the US dollar a measure of support.

What’s coming up?

UK consumer credit figures are due out this morning; the Bank of England (BoE) recently warned that household indebtedness was at a concerning level, so more signs that the UK is borrowing more money could unsettle the pound.

Eurozone confidence figures and German consumer price index data for August could support the euro higher today, with forecasts largely positive.

As well as the headline US second-quarter GDP figures set for release this afternoon, the earlier ADP employment change figures will be highly-impactful. Traders often use these as an indicator of the non-farm payrolls performance, so a solid figure here will raise hopes – and therefore USD – of a strong print from Friday’s key jobs data.

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