Pound buoyed by Brexit extension, but election risks remain

Philip McHugh October 29th 2019 - 2 minute read

The pound trended higher at the start of the week, with the EU’s decision to grant another Brexit extension offsetting election uncertainty.

Sterling is struggling to carry this momentum forward however, with GBP/EUR stalling at €1.1587, GBP/USD muted at $1.2846, and GBP/CAD flat at C$1.6776. GBP/AUD and GBP/NZD are holding steady at AU$1.8756 and NZ$2.0227 respectively.

UK politics will remain in the spotlight today, with GBP exchange rates potentially facing some volatility as parliament holds another election vote.

What’s been happening?

The pound opened this week’s session on a high, edging up during trading after the EU agreed to extend the Brexit deadline until 31 January.

Sterling managed to retain most of these gains through the evening as Prime Minister Boris Johnson failed to secure the two-thirds majority he needed to trigger an early election.

The focus for EUR investors yesterday was a speech by outgoing European Central Bank President Mario Draghi.

In his farewell address Draghi made one final call for EU leaders to adopt more active fiscal policies, but the message appeared to fall on deaf ears, leaving the euro mostly range bound on Monday.   

Meanwhile, the US dollar drifted lower at the start of the week as a risk-on market reduced the appeal of the safe-haven currency.

This followed comments from President Donald Trump, who boosted US-China trade optimism when he suggested talks were ahead of schedule and hinted at a signed deal next month.

What’s coming up?

While Boris Johnson failed to get his motion for a snap election through parliament on Monday, election risks remain.

Undaunted by recent defeats, Johnson will try to push through another motion today. This time he’ll propose a single line bill which only requires a straight majority, potentially injecting some fresh volatility into the pound as the bill has a far better chance of passing.

With Eurozone data thin on the ground today, the euro will continue to trend in a narrow range as investors look toward some high impact releases later in the week.

The US dollar will also struggle to find momentum today as USD investors brace for an expected rate cut from the Federal Reserve on Wednesday.
 

Written by
Philip McHugh

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