Pound (GBP) Exchange Rates Stumble on Brexit Uncertainty for June
Sterling (GBP) continued to struggle on Wednesday morning, remaining weak against many of the majors due to ongoing Brexit uncertainty, particularly with negotiations approaching the crucial end-of-June European summit.
Beyond these concerns, investors are also trying to navigate a storm of important data releases from both the Eurozone and the US, with today’s US GDP estimates expected to cause volatility amongst many of the majors.
Looking ahead, today’s UK GfK consumer confidence reading for May could provide some support, with a small rise in sentiment expected.
GBP/EUR Exchange Rate Falls as German Unemployment Improves
The Pound Euro (GBP/EUR) exchange rate pared recent gains this morning, falling as investors reacted to a surprising uptick in German economic data.
According to the Federal Labour Office, unemployment in Germany fell from 5.3% to 5.2% in May, marking the lowest unemployment rate since German Reunification.
In other news, German retail sales recovered on a monthly basis, rising from -0.4% to 2.3% in April.
This is great news for investors who were concerned that the German economy might be stumbling, particularly with the mixed performance in Q1 this year.
In other news, Italy’s two major parties are currently attempting to secure a coalition deal once again.
Whilst this has eased market fears to a small extent, investor concerns remain regarding the parties’ spending plans and growing Euroscepticism.
GBP/USD Exchange Rate Inches Higher – US GDP Imminent
Sterling traded higher against the US Dollar (GBP/USD) this morning, with very little reason or rhyme other than the current resurgence in demand for the Euro and some mixed forecasts regarding the looming US GDP readings.
Some analysts expect Q1 US GDP to be revised higher, whilst others expect the estimate to be revised even lower.
Regardless, investors will also be keeping an eye on the ADP employment change result for May and the PCE prices estimate, also for the first quarter.
Later in the day we will have the US Federal Reserve’s Beige Book release – a summary of current economic conditions that could provide an insight into the perceived strength of the US economy.
GBP/CAD Exchange Rate Down as Investors Prepare for Bank of Canada Rate Decision
Investors are currently preparing for the Bank of Canada’s May interest rate decision, and whilst a rate rise is not expected on this occasion, markets are hopeful that the recent strong performance in the Canadian economy will keep the attitude at the central bank upbeat.
No action is expected due to ongoing uncertainty in NAFTA negotiations, with the failure to secure a deal having the potential to be hugely detrimental to the Canadian economy.
Keep an eye out for Thursday’s Canadian GDP results, as these could knock GBP/CAD up or down.
GBP/AUD Exchange Rate Down as ‘Aussie’ Dollar Recovers against Safe Haven Currencies
The Australian Dollar posted a slightly mixed performance this morning, strengthening as investor anxiety eased regarding the political situation in Italy, but facing pressure once again due to perceived worsening trade relations between the US and China.
Yesterday the White House repeated threats to slap a 25% tariff on over $50bn worth of imports from Chinese factories, along with plans to impose investment restrictions on various Chinese companies.
China’s Commerce Ministry reacted with shock, with the threat being contrary to the recent consensus reached by both sides – but investors seem to be confident that China will continue to capitulate in favour of fairer trade relations.
In other news, the total number of building approvals issued in Australia plummeted month-on-month in April, falling from 3.5% previously to -5.0%.
Whilst this is bad news for the Australian economy, it seemed to have little influence on the GBP/AUD exchange rate.
GBP/NZD Exchange Rate Down Ahead of New Zealand Financial Stability Report
Sterling continued to trade lower against the New Zealand Dollar (GBP/NZD) this morning, with the ‘Kiwi’ Dollar bolstered by optimistic comments yesterday from the Reserve Bank of New Zealand (RBNZ).
According to the central bank, New Zealand’s banking system will be capable of withstanding a decline in home prices – comments that eased market anxieties in light of signs of cooling in the New Zealand real estate market.
Looking ahead, today will feature the New Zealand financial stability report – an assessment of stability in the New Zealand financial system and any potential risks that may be present.
Upbeat sentiment could put GBP/NZD under greater pressure, whilst caution – especially regarding global trade conditions – could give GBP the upper hand.
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