Pound exchange rates undermined by Trump’s Brexit comments

The pound was rangebound yesterday as the EU’s approval of the UK withdrawal deal was tempered by fears Parliament is unlikely to back the deal in a vote next month.

Sterling has been met by losses this morning however, with GBP/EUR sliding to €1.1268, GBP/USD tumbling to $1.2747 and GBP/CAD softening to C$1.6913, while GBP/AUD and GBP/NZD struck AU$1.7632 and NZ$1.8799 respectively.

Looking ahead, the Federal Reserve will be in focus today, with a speech by its vice-chair potentially weakening the US dollar if he doubles down on his recent dovish remarks.

What’s been happening?                     
                                 
The pound traded in a narrow range against the majority of its peers on Monday despite markets welcoming the EU vote to approve the Brexit deal with the UK.

This muted response from currency markets is likely down to the expectation that the deal will face considerable opposition when it goes before the House of Commons in December, with European Commission President Jean-Claude Juncker warning that no other deal would be offered.

The GBP/EUR exchange rate initially dipped on Monday amidst hints Italy may be willing to alter its 2019 budget.

However, the euro’s gains were offset in the afternoon as the currency was softened by European Central Bank President Mario Draghi’s comments regarding a slowdown in the Eurozone.

What’s coming up?

Looking ahead, the most eagerly anticipated event in today’s calendar will be a speech by Federal Reserve Vice-Chair Richard Clarida later this afternoon.

Investors will be on the lookout for any further signs from Clarida that he believes US rates are almost at a ‘neutral’ level, with the US dollar likely to be particularly sensitive to any signs that rate hikes may pause in 2019. 

Meanwhile, the pound is on the back foot this morning after US President Donald Trump warned that Theresa May’s Brexit plan could hurt a future US-UK trade deal.

Finally, in the absence of any notable data, Italy may remain in focus for EUR investors, with the euro potentially strengthening if Rome makes further allusions towards a possible reconciliation over its budget.