The Pound suffered a dramatic sell-off this week as Brexit jitters reached fever pitch amid fears trade talks could be jeopardised by the UK government’s plan to override part of the EU withdrawal agreement.
Meanwhile, the US Dollar extended its recent recovery as skittish investors flocked to the currency in risk-off trade.
Pound Collapses on Brexit Fears
GBP/EUR – Down four cents on the week’s opening levels
GBP/USD – Down four cents on the week’s opening levels
The Pound plummeted this week as renewed Brexit fears battered the currency following Boris Johnson’s proposal of a bill which would ‘break international law’ by seeking to override part of the EU withdrawal agreement.
This, unsurprisingly, went down poorly with the EU, who threatened to take legal action and impose trade sanctions if the bill is not withdrawn.
While Brexit uncertainty is likely to continue to influence Sterling sentiment next week, GBP investors will also be keeping an eye on the Bank of England (BoE) as it holds its September policy meeting.
Euro Gains as ECB Unfazed by EUR Strength
EUR/GBP – Up three pence on the week’s opening levels
EUR/USD – Unchanged on the week’s opening levels
The Euro trended higher this week, aided by the European Central Bank’s (ECB) latest rate decision.
Not only did this see the ECB revise its 2020 growth forecast higher, but also saw President Christine Lagarde largely dismiss concerns that EUR exchange rates have strengthened too quickly.
Coming up next week, the publication of the latest ZEW economic surveys are likely to be a key focus for EUR investors, with the Euro poised to fall if economic sentiment began to deteriorate this month in light of Europe’s coronavirus resurgence.
US Dollar Bolstered by Jittery Trade
USD/GBP – Up three pence on the week’s opening levels
USD/EUR – Unchanged on the week’s opening levels
Despite some setbacks, the US Dollar ticked broadly higher this week as investors favoured the safe-haven currency in response to souring market sentiment.
This risk-off tone was partly driven by Brexit concerns, but also by US-China tensions, coronavirus uncertainty, and a sharp sell-off in US equity markets.
Turning to next week’s session, the focus will be on the Federal Reserve’s latest rate decision. No policy changes are expected this month, but the Fed could influence USD exchange rates if it offers more insight into how changes to its inflation framework may impact future policy decisions.
Australian Dollar Tumbles on Global Growth Fears
AUD/GBP – Up two cents on the week’s opening levels
AUD/USD – Unchanged on the week’s opening levels
The Australian Dollar traded in a wide range over the past week. Suffering a sharp sell-off in the first half of the week as Brexit uncertainty, setbacks for a coronavirus vaccine, and a plunge in equities cast gloom over markets, before rebounding again as the mood improved later in the week.
Looking ahead, the ‘Aussie’ is likely to take a hit next week, if Australia’s latest job report shows that unemployment continued to rise in August.
Sep 14 EUR Industrial Production (Jul)
Sep 15 AUD RBA Minutes
Sep 15 GBP Unemployment rate (Jul)
Sep 15 EUR ZEW Economic Sentiment (Sep)
Sep 15 USD Industrial Production (Aug)
Sep 16 GBP Inflation Rate (Aug)
Sep 16 USD Retail Sales (Aug)
Sep 16 USD Fed Rate Decision
Sep 17 AUD Unemployment Rate (Aug)
Sep 17 EUR Inflation Rate (Aug)
Sep 17 GBP BoE Rate Decision