The Pound (GBP) strengthened against the majority of its peers this morning as today marks the start of formal Brexit negotiations.
Markets are hopeful that the start of talks will shed some light on how negotiations are likely to proceed, with investors hoping that recent warnings from businesses and Chancellor Philip Hammond over the economic consequences of Brexit may cause the government to soften its approach.
However this rally will likely prove be temporary if the government sticks to its plans for a hard Brexit, which would see the UK lose access to the single market.
The Pound Euro (GBP EUR) exchange rate initially plummeted at the start of this week’s session as Emmanuel Macron was able to secure a majority in the French parliamentary elections.
Markets are hopeful that his victory will help pave the way for his economic reforms, although with his majority being smaller than expected and his planned changes to France’s labour laws remaining deeply unpopular, some observers remain sceptical.
The single currency was also weakened this morning by a slowdown in Eurozone Construction output, which fell from 3.8% to 3.2% in April.
Sterling rallied against the US Dollar (USD) at the start of the European session this morning as markets eagerly await the start of formal Brexit talks later today.
The ‘Greenback’ may strengthen later this afternoon following a speech by Federal Reserve Bank of New York president William Dudley, should he strike a similarly hawkish tone to the FOMC following last week’s rate hike.
With little in the way of economic data, investors are likely to remain focused on a number of speeches made by various Fed officials in the first half of the week, with an upbeat outlook from the majority of them likely to reaffirm the Fed’s plans for another rate hike later in the year.
The Pound Canadian Dollar (GBP CAD) exchange rate leapt by over half a cent this morning, following yet another slowdown in oil prices, with markets worried about the impact of rising US production at a time when demand appears to be faltering.
Sterling surged against the Australian Dollar (AUD) this morning as the start to Brexit talks caused the Pound to rally. The ‘Aussie’ has also been weakened by the news that Moody’s has cut the credit ratings of a dozen Australian banks, citing fears regarding the overheating housing market.
New Zealand Dollar
After initially plummeting against the New Zealand Dollar (NZD) overnight on Sunday as Westpac reported a better than expected rise in domestic Consumer Confidence, the Pound was able to claw back its losses this morning as market sentiment towards Brexit rose ahead of the start of negotiations.
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