Pound exchange rates slow as UK Cabinet ramps up no-deal Brexit plans
Currencies Direct December 19th 2018 - 2 minute read
The pound was forced to relinquish its early gains yesterday afternoon on reports the UK Cabinet had decided to ramp up its no-deal preparations.
Sterling appears to be rangebound this morning however, with GBP/EUR muted at €1.1107, GBP/USD flat at $1.2659 and GBP/CAD stable at C$1.6947, while GBP/AUD and GBP/NZD hold steady at AU$1.7591 and NZ$1.8438 respectively.
Coming up today will be the Federal Reserve’s final rate decision of the year, with the US dollar potentially weakening if the Fed strikes a dovish tone for the year ahead.
What’s been happening?
The pound got off to a fairly positive start on Tuesday as a dip in its peers allowed the UK currency to edge higher.
However Sterling found some of its gains trimmed later in the session as the UK cabinet decided to ramp up preparations for a no-deal Brexit, something some investors took as evidence that the government believes the risks of such a scenario have increased.
This resulted in the GBP/USD exchange rate relinquishing some of its early gains yesterday afternoon, after the pairing initially jumped in the build-up to the Federal Reserve’s upcoming rate decision.
Meanwhile the GBP/EUR exchange rate made some brief gains on Tuesday following the release of Germany’s latest business climate index, which showed that business confidence in Europe’s largest economy had slumped to a two-year low in December.
What’s coming up?
Looking ahead, the focus for markets today will unsurprisingly be on the Fed’s policy decision.
Given a hike has been priced in for some time, any decision to raise interest rates is unlikely to have much of an impact on the US dollar.
Instead the spotlight will be on the Fed’s forward guidance, with USD exchange rates poised to slide if the bank hints at a possible pause in rates next year.
Meanwhile GBP investors are likely to be preoccupied by the release of the UK’s latest CPI figures, with the pound potentially softening if inflation slowed as forecast in November.
Finally, the euro may struggle this morning as analysts predict the Eurozone’s latest economic data will reveal construction output in the bloc will have slowed in October.