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‘No Deal’ Brexit Fears Dominate Pound Movement, Hopes for Hawkish Fed Boost US Dollar

Pound News: Brexit Fears Worsen despite Last Week’s Bank of England Rate Hike

A combination of last week’s Brexit warnings from the Bank of England (BoE) and fresh ‘no deal’ Brexit fears weighed heavily on the Pound on Monday, making the British currency fall against most major rivals.

Investors sold the Pound in reaction to weekend comments from UK Trade Secretary Liam Fox, who indicated he believed the UK’s odds of a ‘no deal’ Brexit were currently around 60/40.

Further potential Brexit developments will take focus for Pound investors today and in the coming sessions, as this week’s notable UK ecostats will not be published until Friday.

Euro News: German Trade Disappointment Weighs on EUR Strength

The Euro was unable to capitalise on Sterling’s Monday selloff, as Germany’s June factory orders results printed an unexpectedly deep contraction of -4%.

The figure was expected to slip to -0.4% and this worsened market concerns that Germany’s economy was already facing some kind of negative impact from US trade policies. The Euro’s selloff was limited though, as some analysts believed it could be a temporary blip.

Market focus will be on Germany’s June trade results today, which could give investors a better idea of how much Germany’s economy has been impacted by global trade jitters so far.

US Dollar News: Expectations for Federal Reserve Hawkishness Persist

After climbing last week on expectations for the Federal Reserve to keep hiking US interest rates over the coming year, the US Dollar remained appealing to investors on Monday.

Last Friday’s US Non-Farm Payroll results were slightly disappointing, but ultimately the Federal Reserve’s hawkish stance and the strong US economic outlook kept the US Dollar as one of the most appealing major currencies.

Some US economic optimism and job openings data will be published today, but even if these disappoint they are unlikely to make the usually resilient US Dollar unappealing.

Canadian Dollar News: GBP/CAD Hits Worst Levels Since November

The Canadian Dollar this week remains one of the strongest major currencies, and on Monday appeared to be continuing its rally against the Pound that has been underway since mid-July. This has been largely due to solid Bank of Canada (BoC) interest rate hike bets and trade developments.

North American Free Trade Agreement (NAFTA) renegotiations between the US and Mexico appeared to be making progress and Canadian officials have noted they are eager to wrap up NAFTA talks as soon as possible. Continued signs of progress have bolstered Canadian Dollar demand.

The most notable event for Canadian Dollar investors today will be July’s Ivey PMI, due during the American session. Of course, any NAFTA developments could influence the Canadian Dollar too.

Australian Dollar News: Chinese Market News Bolsters AUD Support

As China is Australia’s biggest trade partner, some strong market news from China since last Friday has made the Australian Dollar more appealing, and this has pushed GBP/AUD to its worst levels in two months.

Prices of Australia’s most lucrative commodity, iron ore, have been stronger since last week, and Monday’s Australian data showed decent improvements in July.

Australian Dollar investors will be reacting to the Reserve Bank of Australia’s (RBA) August policy decision today, particularly if the bank takes any surprising stances regarding US protectionism or the chances of a US-China trade war.

 

Upcoming Data

Tuesday, 7th August

05:30     Reserve Bank of Australian Policy Decision

07:00    German Trade Balance

07:00    German Industrial Production

07:45    French Trade Balance

15:00    Canadian Ivey PMI

 

Thomas Taylor

Currency Trader

tnt@fcgworld.co.uk

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