Pound stumbles amid political jitters
Philip McHugh June 29th 2022 - 2 minute read
The pound trended broadly lower on Tuesday, undermined by fresh UK political uncertainty.
Sterling is mixed at the start of today’s session, with GBP/EUR buoyed at €1.1604 and GBP/USD muted at $1.2186. GBP/AUD has accelerated to AU$1.7704, while GBP/CAD and GBP/NZD hold steady at C$1.5687 and NZ$1.9545, respectively.
Coming up we may see a series of speeches by heads of the European Central Bank, Bank of England and Federal Reserve dominate currency markets today.
What’s been happening?
The pound spent most of yesterday’s session on the back foot, being undermined by fresh Brexit jitters.
Sterling fell after a vote in the House of Commons on Monday saw MPs back the government’s Northern Ireland protocol reform bill, which will granting the government the power to unilaterally change the protocol.
GBP investors fear attempts to change the protocol could spark a UK-EU trade dispute.
Adding to the pressure on the pound was Nicola Sturgeon’s announcement that Scotland will seek to hold a second independence referendum next year.
The US dollar, meanwhile, enjoyed robust support on Tuesday, with the currency rising in tandem with US Treasury yields.
At the same time the uptick in USD exchange rates undermined demand for the euro due to the strong negative correlation between the two currencies.
What’s coming up?
In the spotlight today will be speeches by ECB President Christine Lagarde, BoE Governor Andrew Bailey and Fed Chair Jerome Powell at the ECB’s annual Forum on Central Banking.
This could see the central bankers drop some hints regarding their future monetary policy, with any hawkish comments potentially lifting their respective currencies.
Also in focus for markets will be the publication of Germany’s consumer price index, with another rise in inflation likely to bolster the euro as it strengthens ECB rate hike bets.
Across the pond the publication of the latest US GDP figures may act as a headwind for the US dollar as the finalised figures are set to confirm the US economy contracted in the first quarter of 2022.
Meanwhile, ongoing Brexit uncertainty could continue to weigh on the pound through today’s session.
Written by
Philip McHugh