Pound undermined by Brexit concerns
Philip McHugh September 7th 2021 - 2 minute read
The pound weakened on Monday, amidst the threat of renewed Brexit tensions between the UK and EU.
Sterling is so far trading in a narrow range this morning, with GBP/EUR flat at €1.1651 and GBP/USD muted at $1.3831. GBP/CAD is rangebound at CA$1.7356, while GBP/AUD and GBP/NZD hold steady at AU$1.8629 and NZ$1.9422 respectively.
Looking ahead, will gloomy economic sentiment in German send the euro lower today?
What’s been happening?
The pound opened this week on the backfoot, as GBP investors were unnerved by the threat of fresh tensions between the UK and EU over Brexit.
This followed reports that the UK will announce another delay to Irish Sea border checks, which are a requirement of the Northern Ireland protocol signed as part of the Brexit deal. GBP investors fear the move could prompt the EU to take legal action against the UK.
Despite the US market being closed for Labour Day, the US dollar was able to trade with modest gains on Monday, reversing some of the ‘greenback’s post-payroll losses.
The buoyant US dollar left the euro struggling to make any meaningful gains yesterday, as a result of the strong negative correlation between the pairing, in spite of data showing a surprise expansion in German factory orders last month.
What’s coming up?
Turning to today’s session the focus looks to be on the publication of the latest German ZEW economic sentiment index.
This could see the euro face some notable headwinds this morning as economists forecast economic morale in the Eurozone’s largest economy will have dropped to its worst levels in over a year.
In the meantime, however, the release of some upbeat industrial production figures from Germany may lend some support to the single currency.
In the UK, ongoing Brexit and coronavirus concerns could send the pound lower today, especially if new cases remain elevated.
Across the pond we could see the US dollar attempt to consolidate yesterday’s gains, particularly if Treasury yields see a post-holiday bump.
Data Releases
07:00 EUR German Industrial Production (Jul)
10:00 EUR German ZEW Economic Sentiment Index (Sep)
10:00 EUR GDP (Q2)
Written by
Philip McHugh