UK Brexit Secretary David Davis Reassures Markets of UK’s Post-Brexit Prospects – GBP Exchange Rates Climb
Pound (GBP) exchange rates broadly climbed on Tuesday morning, bolstered by a speech from UK Brexit Secretary David Davis in which he attempted to reassure businesses about the UK’s prospects after it leaves the EU.
In the latest ‘Road to Brexit’ speech Davis stated that claims the UK is seeking a ‘race to the bottom’ in workers’ rights and environmental standards are ‘based on nothing’.
He also argued the case for continued close co-operation between the UK and the EU in respect to regulations and standards – a means by which frictionless trade can be assured.
In other significant news, the European Parliament is expected to call for Britain to have ‘privileged’ single market access after Brexit, with the drafting of a 60-paragraph document that will outline the bloc’s desires for an ‘association agreement’.
This is a clear break from the sentiment previously expressed by the EU’s negotiation team, which had previously insisted on a clear-cut ‘Canada or Norway’ style trade deal.
The possibility of privileged access to the single market post-Brexit has reassured many businesses, and quickly drove renewed investment to the Pound.
GBP/EUR Exchange Rate Ascends as Eurozone ZEW Data Proves Mixed
The Pound Euro (GBP/EUR) exchange rate surged on Tuesday morning as markets reacted to a slightly gloomier outlook this month for German businesses.
The Mannheim-based ZEW research institute revealed that their economic sentiment index dropped to 17.8 in February, down from January’s score of 20.4 and below the market forecast of 22.5.
This still remains a high score, however and the German economy is expected to continue improve in the coming six months – particularly on the inflation front.
Nonetheless, the ongoing political chaos in Germany and news that the UK could soon be given assurances of ‘privileged’ access to the EU single market after Brexit ultimately left the Euro floundering against the Pound.
GBP/USD Exchange Rate Remains Flat Ahead of FOMC Meeting Minutes
The Pound US Dollar (GBP/USD) exchange rate remained relatively flat on Tuesday morning as markets prepared for tomorrow’s US Federal Open Market Committee (FOMC) meeting minutes release.
Whilst Dollar bears have dominated in recent weeks, bullish sentiment has increased on the prospect of an earlier-than-expected rate hike from the US Fed in March this year.
This is largely due to the upbeat performance of the US economy, with the labour market tightening, inflation remaining above forecasts and wage growth starting to pick-up.
In this respect analysts are hoping that the minutes will reveal hawkish sentiment, or perhaps simply shed more light on the possibility of four rate hikes this year, rather than the initially planned three.
GBP/CAD Exchange Rate Climbs with the ‘Loonie’ Weakened by a Strengthening US Dollar (USD)
Sterling extended its lead against the Canadian Dollar (GBP/CAD) on Tuesday morning with the ‘Loonie’s’ upward potential blocked by a surge in the US Dollar (USD).
This has continued to occur despite a rise in crude oil prices, with hope for a March rate hike from the US Fed and upbeat US ecostats positioning the ‘Greenback’ as the more attractive option.
On the data front, markets will be keeping a keen eye on tomorrow’s US FOMC meeting minutes as well as the Canadian wholesale sales figures for December.
Beyond this, the Canadian Dollar could be largely bearish until Friday when the Canadian inflation readings and budget balance figures will be released.
GBP/AUD Exchange Rate Climbs as RBA Minutes Reveal Wage Growth, Inflation Concerns
The Pound Australian Dollar (GBP/AUD) exchange rate rallied on Tuesday, capitalising on some cautious minutes from the Reserve Bank of Australia’s (RBA) latest meeting.
The RBA is largely depending on a pickup in wage growth in order to deliver a boost to households and spur inflation onwards – but the outlook seems to be one of very gradual progress.
The minutes read:
‘Further progress on these goals was expected over the period ahead but the increase in inflation was likely to occur only gradually as the economy strengthened.’
In this respect markets will be keeping an eye on Thursday’s wage growth readings, with an above-forecast print liable to provide support for Australian Dollar bulls.
GBP/NZD Exchange Rate Up Ahead of Global Dairy Trade Price Auction
All is quiet on the Pound New Zealand Dollar (GBP/NZD) exchange rate front, with Sterling continuing its steady rise and the ‘Kiwi’ Dollar remaining rather bearish ahead of the imminent Global Dairy Trade price auction figures.
If the trade auction yields another rise in dairy prices then the New Zealand Dollar could find a stronger footing, but whilst the US Dollar (USD) is on the rise it is unlikely that the ‘Kiwi’ Dollar will find much purchase.
This week the US Dollar was touching three-year highs when valued against a basket of major currencies. The greenback’s traditional role as one of the safe-haven currencies is helped by a domestic economy that is largely immune to the threats of the coronavirus.
Last update: 22 Feb, 2020
The strong start to the year for “risk-on” currencies is already a distant memory.
Posted: 3 Feb, 2020
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.
Last update: 8 Jan, 2020