Pound exchange rates volatile as UK Raab quits

The pound traded in a wide range yesterday, as GBP investors braced themselves for a crunch cabinet meeting to decide the fate of the draft Brexit deal.

This volatility in Sterling continues today, with GBP/EUR sliding to at €1.1385, GBP/CAD sinking to C$1.7012, while GBP/AUD and GBP/NZD tumble to AU$1.7682 and NZ$1.888 respectively. GBP/USD has also tumbled over 1% to $1.2850.

Looking ahead, Brexit is likely to continue to overshadow everything else today, likely resulting in further fluctuations in GBP exchange rates. At the time of writing on Thursday morning it had just been announced that Brexit Secretary Dominic Raab had resigned from his post, leadings to sharp pound losses.

What’s been happening?                   
                                  
The pound witnessed some major swings in movement on Wednesday, with considerable volatility in the UK currency being driven by skittish GBP investors in the build up to a crunch cabinet meeting to discuss the draft Brexit text agreed by the UK and EU on Tuesday.

While Sterling was able to stabilise late on Wednesday following the announcement that the cabinet chose to back the deal, its rally was capped by fears parliament will still block the agreement.

Some of Sterling’s largest swings came against the US dollar, with the GBP/USD exchange falling as much as 0.8% on Wednesday morning before recouping these losses later in the afternoon as a surprise drop in US core inflation saw investors shun the ‘greenback’.

Trade in the GBP/EUR exchange rate meanwhile was more measured yesterday, with the euro unable to secure similar gains against the pound as it was undermined by Germany’s latest GDP figures as it posted a contraction in growth in the third quarter.

What’s coming up?

While the UK will release its latest retail sales figures this morning, they are unlikely to have much of an impact on the pound despite expectations of a rebound in October.

Instead, any movement in Sterling is likely to be dominated by Brexit, with trade in Sterling likely to be erratic as Theresa May faces a grilling from MP’s over the deal later today, with speculation she could face a vote of no-confidence.

The US will also publish its latest retail sales figures this afternoon, with the absence of any major downsides to the US dollar likely to see it rise if sales growth jumps from 0.1% to 0.5% as forecast in October.

Meanwhile movement in the euro may be driven by a speech from the European Central Bank’s (ECB) Benoît Cœuré, with an upbeat tone from the policy maker potentially strengthening the single currency.