Pound exchange rates mixed despite weekend Brexit agreement

Philip McHugh November 26th 2018 - 2 minute read

The pound was left to tread water at the end of last week’s session when Spain threatened to vote against the Brexit deal, unnerving some investors.

Despite the deal passing Sterling appears subdued this morning, with GBP/EUR muted at €1.1290, GBP/USD flat at $1.2838 and GBP/CAD steady at C$1.6932, while GBP/AUD and GBP/NZD begin to edge lower, striking AU$1.7672 and NZ$1.8875 respectively.

Looking ahead, GBP exchange rates may struggle over the next couple of weeks as Theresa May faces the arduous task of selling the deal to British MPs.

What’s been happening?                 

The pound was placed on the defensive on Friday as Spain’s threat to ‘stop the clock’ in Brexit negotiations threw up one final hurdle in talks.

While Spain would not be able to veto the Brexit deal on their own, Brussels’ desire for unanimous approval led some skittish GBP investors to worry Spain’s objections could risk derailing Theresa May’s hard-fought Brexit deal.

However Spain ultimately backed down on Saturday, allowing EU leaders to approve the deal on Sunday.

These Brexit concerns undermined attempts by GBP/EUR to rally on Friday as the euro stumbled against many of its other peers when the latest Eurozone PMIs showed business growth had fallen to a four-year low across the bloc in November.

Meanwhile the GBP/USD exchange rate slumped around half a cent at the end of last week’s session as markets grew increasingly pessimistic that a meeting between Donald Trump and Xi Jinping at this week’s G20 summit of leaders will be able to resolve the US-China trade dispute.

What’s coming up?

Looking ahead, with the Brexit deal having been approved by EU leaders the pound looks likely to find some relief at the start of this week.

However Theresa May now faces the difficult task of bringing Parliament on board with the deal, with Sterling likely to be met by volatility as many MPs remain in opposition to the plan.

Meanwhile the euro may continue to struggle at the start of this week’s session as Germany’s business climate index is expected to slide in November as the outlook from firms becomes increasing gloomy.

Finally the US dollar is likely to remain buoyed by safe-haven demand this week in the run-up to the G20 meeting, although it could face some downsides if US third quarter growth is revised lower with the release of the latest GDP estimate on Wednesday.

Written by
Philip McHugh

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