Heightened GBP volatility as Brexit deal reaches crunch time

This week, market volatility is expected to heighten with Theresa May’s Brexit deal being put to the vote on Tuesday. Forecasts suggest the vote may fail to yield the support the Prime Minister needs, meaning May would have three days to prepare a Plan B. Political uncertainty is set to escalate, and Sterling levels may be particularly volatile in coming sessions. If you’d like to speak to one of our currency specialists about your money transfer, contact your Dealer or call us on +44 (0)20 7989 0000.
GBP

Pound - GBP 

British Pound awaits Brexit developments 

Last week, news that the UK’s exit from the EU could be delayed allowed the British currency to make its biggest one-day gain against the Euro since November. Brexit has been playing a significant role in the Pound’s fortunes since the referendum in 2016, and the upcoming vote could determine the path the UK takes. This week, Theresa May’s deal is largely predicted to fail, leaving even more uncertainty on the table. Will there be a delay in Brexit? A vote of no-confidence? A second referendum? Or a different reaction entirely? The result and May’s response to it could significantly impact the way Sterling trades, meaning all eyes will be on politics in the weeks ahead. In other news, the UK’s inflation reading for December will be revealed on Wednesday, while Bank of England (BoE) Governor Mark Carney also testifies on the central bank’s financial stability report.

Euro - EUR

Political concerns in the Eurozone mount

The Euro reached its highest level in around three months against the US Dollar last week as investors ebbed away from safe-haven currencies. However, Friday saw the single currency fall; concerns over the Italian economy are becoming more prominent, while the weekend news suggested the Greek government may be facing a vote of no-confidence. It’s not a huge week in terms of economic data, but one of the most notable events will come from the European Central Bank (ECB). On Tuesday, ECB Chief Mario Draghi will present the central bank’s annual report in Strasbourg which may be of interest to some investors in the Euro. Eurozone Gross Domestic Product (GDP) data will also be revealed for 2018, ahead of the final December Eurozone inflation readings on Thursday.

US Dollar - USD 

US economy dented by government shutdown 

Last week, optimism over progress in US/China trade talks saw risk appetite increase, luring investors away from the US Dollar. The US is now experiencing its longest government shutdown ever. 800,000 Federal employees didn’t get paid on Friday, while businesses that depend on government subsidies also are going without. The shutdown is costing the US economy $1.2B a week, and so many are keen for a resolution to be reached. In the week ahead, Wednesday’s US Retail Sales reading could influence the USD exchange rate, as could the University of Michigan’s Sentiment reading on Friday. 

Australian Dollar - AUD 

Australian Dollar awaiting consumer confidence and inflation numbers 

The Australian Dollar reached a three-week high versus the US Dollar last week, tracing gains from the Chinese Yuan which hit a five-month high. Optimism surrounding US/China trade talks has helped currencies like the Aussie and New Zealand Dollars. Tuesday will see the release of Australian Consumer Confidence data, before Consumer Inflation Expectations and Home Loans figures on Thursday.

New Zealand Dollar - NZD

Chinese developments impact Aussie and Kiwi Dollars

While last week might have been a positive one for the New Zealand Dollar, which recorded gains as signs of tension between the US and China ebbed, Monday hasn’t been such a great start for the Trans-Tasman currencies. Chinese economic data has caused concerns over the health of the Chinese economy after much speculation of a global slowdown. Chinese exports dropped by -4.4% in December on the year – the worst decline in two years and a signal of how trade tensions with the US have affected growth. Imports also tumbled by -7.6% on the year, another sign the second-largest global economy is having difficulty. China is Australia and New Zealand’s biggest trading partner, so developments can often impact the Aussie and Kiwi Dollars. Wednesday will see New Zealand House Sales data revealed, followed by manufacturing figures on Thursday.

Canadian Dollar - CAD

Canadian Dollar gains after BoC reassurances 

The Canadian Dollar experienced a second week of gains against the US Dollar last week, despite a fall on Friday in line with softer oil prices. The Bank of Canada (BoC) held interest rates last week, but soothed markets by suggesting the challenges facing the economy now are likely to be fleeting. In the week ahead, Friday’s likely to be the most exciting day in terms of economic data, with the Canadian inflation reading due out.