Pound climbs as Brexit fears ease
Philip McHugh August 28th 2019 - 2 minute read
The pound struck higher on Tuesday, spurred by optimism surrounding cross-party efforts to block a no-deal Brexit.
Sterling appears to be consolidating these gains so far this morning, with GBP/EUR flat at €1.1068, GBP/USD rangebound at $1.2277 and GBP/CAD stable at C$1.6329. GBP/AUD and GBP/NZD are both edging higher, striking AU$1.8220 and NZ$1.9370 respectively.
Italian politics will return to the spotlight today as the deadline for government reformation expires later this morning.
What’s been happening?
The pound enjoyed broad gains yesterday as markets welcomed news of a cross-party agreement which could see legislative measures used to block a no-deal outcome in October.
The meeting between Labour leader, Jeremy Corbyn and other MPs opposed to a no deal, outlined a strategy to use Parliamentary legislation in efforts to prevent Boris Johnson from implementing a no deal Brexit.
Party leaders are also considering a vote of no-confidence in the Prime Minister should legislative measures prove unsuccessful.
Meanwhile, the euro stumbled yesterday in response to dovish rhetoric from the European Central Bank (ECB) in which Vice President Luis de Guindos warned that low rates are here to stay.
The US dollar was also subdued yesterday as a deterioration in US consumer confidence in August and heightened US-China trade tensions limited the currency’s appeal.
What’s coming up?
Looking ahead, the deadline for reformation of the Italian government, imposed by the current President Sergio Mattarella, expires this morning.
Talks between the anti-establishment Five Star Movement and the centre-left Democratic Party broke down as the two sides disputed the reinstatement of Giuseppe Conte as Prime Minister.
If no agreement can be found, then Mattarella will need to install a caretaker government and call a snap election, the uncertainty of which could weaken the euro.
USD investors will look to a speech by the Federal Reserve’s Thomas Barkin today. USD exchange rates could potentially weaken if he signals a September rate cut.
Finally, in the absence of economic data, UK political developments are set to be the main catalyst for movement in GBP exchange rates today.