Pound exchange rates rally as May survives no-confidence vote

Philip McHugh December 13th 2018 - 2 minute read

The pound shot higher during yesterday’s trading session as markets breathed a sigh of relief after Theresa May survived a vote of no-confidence.

Sterling looks to be edging higher again this morning, with GBP/EUR ticking up to €1.1133, GBP/USD climbing to $1.2673 and GBP/CAD advancing to C$1.6918, while GBP/AUD and GBP/NZD holding steady at AU$1.7506 and NZ$1.8451 respectively.

Coming up today will be the European Central Bank’s final rate decision of 2018, with the euro potentially weakening if the bank strikes a cautious tone for the upcoming year…

What’s been happening?                                                
      

The pound appreciated sharply on Wednesday, recouping the majority of Tuesday’s losses on the expectation that Theresa May would survive the no-confidence vote called at the start of the session.

While May did manage to survive the vote, a narrower-than-expected victory appeared to take the wind out of Sterling’s sails, leading the currency to relinquish some of its gains in the immediate aftermath of the vote.

The GBP/EUR exchange rate had accelerating around a cent on Wednesday, with the euro unable to put up much of a fight on the back of some mixed Eurozone industrial production figures.

Meanwhile the rise of the GBP/USD exchange rate was aided yesterday by the release of the latest US CPI figures, with a slowdown in domestic inflation weighing on the US dollar as it further weakened the case for the Federal Reserve to continue raising interest rates in 2019.

What’s coming up?

Looking ahead, the euro is likely to be in the spotlight as markets await the conclusion of the ECB’s latest policy meeting.

While interest rates are likely to remain unchanged, the bank is widely expected to bring a formal end to its quantitative easing programme this month.

However, of most concern to investors will likely be the ECB’s forward guidance for 2019, with the euro potentially dipping if the recent slowdown in the Eurozone leads the bank to play down the possibility of a rate hike next year.

Meanwhile May’s visit to Brussels will be closely watched by GBP investors today as she attempts to secure assurances from EU leaders regarding the temporary nature of the Irish backstop agreement.

Finally, a lull in notable US economic data is likely to leave USD investors focused on the Fed today, likely leading to further losses in the US dollar amid speculation of a rate pause from the bank next year.
 

Written by
Philip McHugh

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