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Lukewarm Reaction to Draft EU Brexit Proposals Weakens Pound

Pound News: EU Proposals Fail to Ease Brexit Jitters

The publication of the EU’s draft proposals for its post-Brexit trade relationship with the UK failed to encourage particular excitement amongst investors.

Demand for the Pound (GBP) remained distinctly limited on Wednesday as the UK and EU appear no closer to reaching any significant compromises regarding Brexit, even with the clock counting down.

If both sides show no real signs of progressing towards a potential deal the mood towards GBP exchange rates is unlikely to particularly pick up.

 

Euro News: Markets Brace For Dovish ECB Meeting

There was no real surprise as the fourth quarter Eurozone gross domestic product was confirmed to have eased from 0.7% to 0.6% on the quarter.

Even so, the Euro (EUR) struggled to find any particular support yesterday as concerns over the prospect of a US-instigated trade war continued to mount.

With the European Central Bank (ECB) looking set to maintain a rather dovish outlook at today’s policy meeting the potential for a Euro rally looks limited.

 

US Dollar News: Strong Jobs Data Offsets Protectionism Fears

Markets were not impressed by the resignation of key White House economic adviser Gary Cohn, which was seen to increase the risk of the US sliding further into protectionism.

However, the US Dollar (USD) saw renewed gains on the back of a stronger-than-expected ADP employment change figure, which points towards further tightening of the domestic labour market.

So long as this afternoon’s jobless claims figures support the idea of a further decrease in US unemployment the mood towards the US Dollar is likely to remain positive.

 

Canadian Dollar News: BOC Maintains Cautious Policy Outlook

As expected, the Bank of Canada (BOC) left interest rates on hold at its March policy meeting, maintaining a relatively cautious outlook.

Fresh warnings over the risk to the Canadian economy from protectionist US policies gave investors fresh incentive to sell out of the Canadian Dollar (CAD) yesterday.

Weaker housing market data could see CAD exchange rates shedding further ground this afternoon, undermining confidence in the domestic economy.

 

Australian Dollar News: Weaker GDP Failed to Prevent ‘Aussie’ Gains

Even though the fourth quarter Australian gross domestic product data fell short of forecast Australian Dollar (AUD) exchange rates still returned to an uptrend.

This was largely the result of technical resistance, with the Australian Dollar’s recent run of softness limiting its potential for further losses in the near term.

Even so, if demand for risk-sensitive assets continues to decline in response to US trade policy the ‘Aussie’ may struggle to hold onto any gains for long.

 

Upcoming Data

Thursday, 8 March

12:45     European Central Bank Rate Decision

13:30     Canadian Building Permits

13:30     US Initial Jobless Claims

21:45     New Zealand Retail Card Spending

James Baxter

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