GBP Exchange Rates Weakened by Brexit Jitters as Pound to US Dollar, Euro Fall
Brexit uncertainty put the Pound on the defensive yesterday, with the Pound to US Dollar exchange rate dropping sharply, as low as $1.28 this morning.
Reports of a lack of progress in UK-EU Brexit trade talks spooked markets, pushing GBP/EUR lower as well.
Further denting the appeal of Sterling was the UK’s latest jobs report, which revealed domestic unemployment soared to a three-year high in August as the first wave of coronavirus redundancies struck.
Turning to today’s session, we can expect GBP exchange rates to remain highly sensitive to Brexit headlines amid the final day of negotiations ahead of tomorrow’s deadline.
EUR Muted as Economic Sentiment Sours, Euro to Pound Gains
The Euro (EUR) edged lower in trade on Tuesday after the latest ZEW survey reported a sizeable drop in German economic sentiment this month.
Investor morale reportedly plunged to its lowest levels since May in response to the rise in uncertainty surrounding Europe’s coronavirus resurgence, Brexit and the US election.
Added to this, surging coronavirus cases across Europe and the threat of tighter lockdowns weigh on EUR sentiment, contributing to the Euro Dollar exchange rate losing a cent.
However, the EUR/GBP exchange rate gained yesterday due to Brexit uncertainty.
With tomorrow’s self-imposed UK government deadline looming for an outline of a deal, reports of expectations of talks continuing beyond Thursday’s EU summit amid a lack of progress weighed on the Pound Euro exchange rate.
Coming up today, the focus for EUR investors will be on the Eurozone’s latest industrial production figures, with a notable slowing of factory output in August likely to stoke concerns over the slowing of the bloc’s economic recovery.
Euro exchange rates could also come under pressure as European governments face rising Covid-19 infections. Later today, French President Emmanuel Macron is expected to announce stricter national lockdown measures, possibly offsetting some Brexit pressure on GBP/EUR.
Risk-Off Trade Strengthens USD against Pound and Euro
The US Dollar (USD) rallied through yesterday’s trading session as a souring of market sentiment bolstered the appeal of the safe-haven currency.
This was triggered by fresh doubts over a US stimulus package after House Speaker Nancy Pelosi told US lawmakers on Tuesday that Trump’s stimulus offer ‘falls significantly short’.
In the absence of any notable US data releases today, it’s likely the focus for USD investors will turn to the upcoming election, the uncertainty of which could stoke fresh volatility in the US Dollar.
Canadian Dollar (CAD) Fails to Capitalise on Rebound in Oil Prices
The Canadian Dollar (CAD) continued to trade in a narrow range on Tuesday, with the commodity-linked currency seemingly unable to benefit from a convincing rebound in oil prices which propelled WTI crude back above $40 a barrel.
Australian Dollar (AUD) Undermined by China Coal Row
Meanwhile, a speech from Reserve Bank of Australia (RBA) Governor Philip Lowe will provide fresh impetus for AUD investors later tonight. Will a dovish tone from Lowe set the Australian Dollar up for additional losses?
New Zealand Dollar (NZD) Gains Reversed by Dovish RBNZ
The New Zealand Dollar (NZD) initially edged a little higher in overnight trade before retreating again ahead of the European session after Reserve Bank of New Zealand (RBNZ) Assistant Governor Christian Hawkesby suggested New Zealand requires more policy support.