3-month Brexit extension bolsters GBP

Currencies Direct October 29th 2019 - 2 minute read

  • Pound benefits as EU leaders approve extended Brexit deadline


  • Weak manufacturing signals dent US dollar


  • Euro under pressure as German inflation signals prove muted

Brexit deadline extension lifts pound
The EU’s decision to offer the UK a three-month ‘flextension’ of the Brexit deadline helped the pound to recover some ground at the start of the week.
Even though the move was widely expected investors still took encouragement from the reduced risk of an imminent no-deal Brexit.
As long as a sense of political uncertainty continues to hang over the UK, however, any GBP exchange rates are likely to prove limited in duration.
A weakening of consumer credit in September could also put a dampener on the pound as investors look for fresh signs of slowing economic momentum.
US dollar looks for rally on stronger consumer confidence
A surprise slump in the Dallas Fed manufacturing index helped to limit the appeal of the US dollar yesterday as the sector showed fresh evidence of stalling.
With the US and China appearing close to agreeing a phase one trade deal an increased sense of market risk appetite also dented USD exchange rates.
However, as forecasts point towards a modest uptick in October’s consumer confidence index this may offer the US dollar a boost today.
Even so, as markets brace for the Federal Reserve’s expected interest rate cut USD exchange rates may struggle to find any significant positive momentum.
Signs of weak German inflation drag down euro
Underwhelming German import price index figures left the euro on a muted footing, highlighting a continued lack of inflationary pressure within the Eurozone’s powerhouse economy.
As import prices dropped -2.5% on the year in September this raised the odds of a disappointing consumer price index reading, dragging on the single currency.
Comments from Bundesbank officials could add to the bearish mood of EUR exchange rates today, with markets wary of any signs of economic anxiety.
If officials express fresh concern over the health of the German economic outlook this could drive the euro lower across the board.
Upcoming Data:
Tuesday, 29th October 2019

09:30 GBP Consumer Credit

14:00 USD Consumer Confidence Index

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