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Brexit Speculation Keeps Sterling Climbing as Risk-Sentiment Thins Ahead of US Mid-Term Elections

Pound News: Sterling Continues to Climb on Unconfirmed Reports of Brexit Process

Over the weekend, the Sunday Times published an article claiming that the EU had made notable concessions to the UK in Brexit negotiations, and that it was willing to offer a UK-wide customs union arrangement in order to resolve the issue around Ireland’s border.

This was the primary cause of Sterling strength on Monday. Investors largely brushed off denials from UK and EU officials to the contrary.

No notable UK data will be published today, but the Pound is much more likely to react to any further Brexit developments and speculations regardless. The Pound’s rally could continue on signs that a deal may be agreed in the coming weeks.

Euro News: Eurozone’s Political Jitters and Economic Concerns Persist

Last week’s risk-on rally was brief, and the Euro struggled to benefit much from the movement due to weaker Eurozone growth data and persistent political uncertainties. Yesterday’s Eurozone investor confidence data from Sentix fell to a two-year-low, which weighed further on the Euro.

Throughout last week, Eurozone growth and manufacturing data fell short of forecasts. Investors also remain anxious about Italy’s budget issues, and tensions between Italy and the EU remain.

The Eurozone’s final October services and composite PMI stats will come in today. If they fall short, like Eurozone manufacturing did last week, the Euro could be in for another day of poor performance.

US Dollar News: US Dollar Firms Ahead of US Mid-Term Elections

Despite a boost in demand for riskier assets last week, the rise in risk-sentiment was short-lived as investors returned to safe havens like the US Dollar at the beginning of the week.

Investors were anxious ahead of this week’s upcoming US midterm elections and the Federal Reserve’s November policy decision. As a result, investors firmed on the safe haven US Dollar on Monday.

Midterm elections will be held throughout today. If the results lead to any major changes in the US Congress they could impact US President Donald Trump’s fiscal policy plans. This could lead to US Dollar weakness.

Canadian Dollar News: CAD Avoids Losses amid Bank of Canada Governor’s Optimism

The Pound to Canadian Dollar exchange rate was unable to climb much on Monday, as despite stronger safe haven demand, CAD was supported by the latest comments from Bank of Canada (BoC) Governor Stephen Poloz.

Poloz pushed back against critics, saying that recent data was proof that markets were normalising, rather than a worrying sign to be cautious. His comments followed strong Canadian job market data last week.

The Canadian Dollar could remain buoyant today if the latest building permits figures impress investors. Shifts in risk-sentiment may also influence Canadian Dollar movement.

 

Australian Dollar News: Australian Data Fails to Impress

Demand for the Australian Dollar was a little weaker on Monday, making it difficult for the risk correlated currency to hold onto last week’s gains against the Pound.

Australia’s TD-MI inflation gauge from October slowed from 0.3% to 0.1% and political jitters worsened, giving investors little reason to keep buying the risky ‘Aussie’. AUD movement was also weak due to signs of economic slowdown in China, Australia’s biggest trade partner.

Australian Dollar investors will be spending much of today’s session reacting to the Reserve Bank of Australia’s (RBA) November policy decision. If the bank’s tone is perceived as more hawkish than expected the Australian Dollar could be in for a session of gains.

 

Upcoming Data

Tuesday, 6th November

03:30    Reserve Bank of Australia Policy Decision

07:00    German Factory Orders

08:50    French Services and Composite PMI

08:55    German Services and Composite PMI

09:00    Eurozone Services and Composite PMI

13:30    Canadian Building Permits

15:00    US JOLTs Job Openings

 

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To keep up to date with the Euro, visit the Euro Blog in our Currency News section.

 

David Worthington

Currency Trader

daw@fcgworld.co.uk

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