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The row over claims the UK could benefit from Brexit to the tune of £350 million per week was reignited again yesterday, weighing on Sterling as further signs of disarray in the government were revealed.
The pound is starting today on a mixed footing, with GBP/EUR having fallen -0.3% to €1.1270 while GBP/USD has climbed to US$1.3527. GBP/AUD has weakened -0.1% to A$1.6939, and GBP/NZD has dropped -0.2% to NZ$1.8566, yet GBP/CAD has climbed 0.3% to C$1.6643.
Read on to discover why markets will largely be overlooking today…
What’s been happening?
Yesterday was a lesson in how quickly market excitement can fizzle out. After hitting a two-month high versus the euro and a one-year high against the US dollar on Friday, the pound spent yesterday’s session on the decline.
Both GBP/EUR and GBP/USD were down -0.6% by the end of the session. Markets were initially disconcerted by fears that the UK government’s position on Brexit remained as disjointed and chaotic as they had previously believed.
This was because Foreign Secretary Boris Johnson repeated in an article for The Telegraph on Friday evening the claim that Brexit would free up £350 million per week for the UK; much of which could go on the NHS, he said.
Commentators are worried this could be another attempt by Johnson to position himself for a leadership bid, causing chaos at a time where the UK government and economy could do without it.
As if that didn’t put the markets in a gloomy enough mood, Bank of England (BoE) Governor Mark Carney stated that any interest rate adjustments would be limited and gradual. This somewhat deflated market jubilance following last week’s upbeat Monetary Policy Committee (MPC) meeting.
Meanwhile, the US dollar was climbing sharply higher as markets eyed this week’s upcoming meeting of the Federal Open Market Committee (FOMC). No changes are expected to policy this time around, but odds of a hike in December have risen and it seems only a matter of time before the Fed begins to shrink its enormous balance sheet.
What’s coming up?
There is no data on the UK economic calendar today, although the continuing uncertainty surrounding the government’s Brexit approach is likely to weigh on the pound, especially given that Theresa May makes a speech on the state of negotiations on Friday.
Meanwhile, GBP/EUR could see strong movement from the latest ZEW economic sentiment surveys for Germany and the Eurozone.
US building data is the most influential data on a quiet calendar, but the fact markets are still betting upon a third rate hike later this year should support USD ahead of tomorrow’s Federal Open Market Committee (FOMC) policy meeting.
We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.
