Brexit Headlines in the Spotlight this Week for Pound (GBP) Exchange Rates
The Pound (GBP) proved volatile on Monday, falling against the majors initially before rising into the afternoon.
Lacking much in the form of salient UK data, investors were largely responding to changing macroeconomic factors relating to the US and Eurozone economies, with news that Harley Davidson will be moving some of its manufacturing out of America hurting the ‘Buck’ and siphoning some demand to the Pound.
Looking ahead, Brexit headlines should dominate for the Pound this week, with the EU Council meeting due to start on Thursday.
Investors crave greater clarity regarding the UK’s future outside of the EU, with any sign of progress liable to send Sterling higher.
GBP/EUR Exchange Rate Down despite Lower German Business Morale
The Pound Euro (GBP/EUR) exchange rate traded slightly lower on Monday, falling despite a surprising drop in German business optimism.
Germany’s IFO business climate results were rather soft across the board, with the current assessment reading for June falling from 106.1 to 105.1, down from the forecast of 105.6.
This was just the latest in a run of consecutive falls for the index, with concerns regarding global trade relations – particularly US President Donald Trump’s threats to target the EU’s automotive industry – weighing on confidence.
US Dollar (USD) Exchange Rates Mixed as Harley-Davidson Moves some Manufacturing from American Soil
The US Dollar (USD) came under greater pressure today as investors responded to news that US manufacturer Harley-Davidson plans on shifting some of its motorcycle production overseas in order to avoid the burden of the new EU tariffs.
The Wisconsin-based company stated:
‘To address the substantial cost of this tariff burden long-term, Harley-Davidson will be implementing a plan to shift production of motorcycles for EU destinations from the US to its international facilities to avoid the tariff burden.’
Investors responded to this news by selling the ‘Buck’, though a small contingency of analysts expect that tariffs of this nature will actually prove beneficial for the value of the currency, with higher inflation liable to push the US Fed towards an even more aggressive stance on monetary policy.
GBP/CAD Exchange Rate up after Last Week’s Poor Canadian Inflation, Retail Sales
The Pound Canadian Dollar (GBP/CAD) exchange rate continued to climb higher on Monday, supported by the apparent collapse of NAFTA talks and last week’s raft of disappointing Canadian data releases.
The April retail sales print fell from 0.8% to -1.2% month-on-month whilst consumer price inflation held at 2.2%, below the forecast rise of 2.6%.
This news crippled investor hopes for a rate rise in the coming months and ultimately left the ‘Loonie’ on even more uncertain ground.
GBP/AUD Exchange Rate Climbs as Trade War Tensions Escalate
The Australian Dollar (AUD) tumbled at the start of the week, with investors fleeing to safer shores as US President Donald Trump reaffirmed his intentions to confront unfair trade practices against the US.
President Trump stated:
“The United States is insisting that all countries that have placed artificial trade barriers and tariffs on goods going into their country, remove those barriers and tariffs or be met with more than reciprocity by the USA.’
Beyond this, the latest US measures to limit Chinese investment in the US have also had an impact, lowering risk appetite amongst the markets and leaving commodity correlated currencies like the ‘Aussie’ Dollar down in the doldrums.
New Zealand Dollar (NZD) Exchange Rates Still Weak on Lower Dairy Prices
The ‘Kiwi’ Dollar (NZD) continued to trade lower against the Pound today, with investors avoiding the commodity-based currency as risk appetite plummeted.
Investors were also wary after last week’s dip in the prices of New Zealand’s primary export commodity, dairy products.
Looking ahead, Thursday will feature the Reserve Bank of New Zealand’s (RBNS) rate decision, with investors liable to play it safe until the meeting has passed before making any moves on the currency.
The threat of a proxy war between the US and Iran in Iraq has pared back some of the recent gains of “risk-on” currencies.
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