Pound exchange rates mixed as Brexit uncertainty builds

Philip McHugh February 22nd 2019 - 2 minute read

The pound put on a mixed performance on Thursday as renewed Brexit uncertainty forced the UK currency to relinquish its early gains.

Sterling remains subdued this morning, with GBP/EUR muted at €1.1482, GBP/USD flat at $1.3031 and GBP/CAD stable at C$1.7227, while GBP/AUD and GBP/NZD hold steady at AU$1.8317 and NZ$1.9166 respectively.

Potentially setting the tone for currency markets today will be a speech by European Central Bank (ECB) President Mario Draghi later this afternoon, with the euro potentially weakening depending on his outlook.

What’s been happening?

The pound initially enjoyed a solid start on Thursday, advancing through the first half of the European session on the back of upbeat UK finance figures and taking advantage of the weakness of its peers.
However, Sterling’s rally stalled in the afternoon after an anonymous government source was reported to have quashed suggestions that a new Brexit deal would be in place for a parliamentary vote next week.

These tentative gains were reflected clearly in the GBP/EUR exchange rate, with the euro initially softening following a shock contraction in the Eurozone’s manufacturing PMI in February before rebounding after the ECB minutes revealed the bank remains mostly optimistic in its outlook for 2019.

Meanwhile, after relinquishing its initial gains, the GBP/USD exchange rate remained flat on Thursday, with the US dollar unable to find momentum after US economic data fell short of expectations.

What’s coming up?

Looking ahead, the focus today may be on a speech by ECB President Mario Draghi.

This could see the euro soften later this afternoon if Draghi acknowledges that the recent slowdown in the Eurozone maybe more persistent than first thought and could result in a more cautious approach to monetary policy than outlined in its most recent minutes.

Meanwhile, barring any major developments in Brexit, movement in the pound may be driven by the publication of the UK’s latest retail data, with Sterling sentiment potentially souring if the Confederation of British Industry’s distributive trades index indicates that retail activity contracted in February.

Finally, in the absence of any impactful US economic data, the US dollar may still see some movement should any of the Federal Reserve members speaking today drop any hints on the bank’s policy outlook for 2019.

Written by
Philip McHugh

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