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Pound Hit by Shock of UK Government Resignations, US Dollar Remains Weak on US Wage Data

Pound News: High-Profile UK Government Resignations Shock GBP Investors

Sterling fluctuated widely on Monday, as surprising developments in the UK government left investors uncertain. David Davis resigned as UK Brexit Secretary on Sunday night, and Boris Johnson resigned as Foreign Secretary on Monday afternoon.

As Johnson’s resignation was particularly surprising, the Pound slumped. Sterling lost over 0.4% against the US Dollar, Euro and New Zealand Dollar, while also shedding 1% against the Australian Dollar amid concerns that Johnson could mount a leadership challenge against UK Prime Minister Theresa May.

Britain’s first monthly growth rate report will be published today, but following a turbulent Monday, UK politics and Brexit developments are likely to remain the driving force of Sterling trade.

 

Euro News: Signs of Eurozone Weathering Trade Jitters Bolsters Shared Currency

Germany’s seasonally adjusted trade balance for May beat forecasts, as did the nation’s export figure. This was followed by a surprising jump in Sentix’s latest Eurozone investor confidence report.

The day’s data generally indicated that the Eurozone economy is weathering market jitters caused by US trade protectionism so far. However, the shared currency’s strength was limited due to comments from European Central Bank (ECB) President Mario Draghi reminding markets that Eurozone interest rates would not rise for over a year.

Further Eurozone confidence data will be published today, ZEW’s Eurozone and German economic sentiment results from July.

 

US Dollar News: Wage Price Concerns Limit USD Strength

Demand for the US Dollar was little changed throughout Monday’s session. While the Pound to US Dollar exchange rate slipped due to high profile resignations in the UK government, the US Dollar’s gains were limited.

The US Dollar has been weaker since last Friday’s US Non-Farm Payroll report revealed that US wage growth was falling below expectations. This has led to lower Federal Reserve interest rate hike bets and a weaker US Dollar.

This movement is likely to continue today amid a lack of notable US ecostats as investors anticipate Thursday’s US inflation rate report.

 

Canadian Dollar News: CAD Firms as Investors Anticipate Bank of Canada (BoC) Decision

Despite some mixed Canadian ecostats in recent weeks and concerns about how a US-China trade war could impact Canada’s economy, investors are still betting that the Bank of Canada (BoC) will hike Canadian interest rates this week.

 

The Canadian Dollar climbed against a weakened Pound on Monday, but CAD movement was limited elsewhere.

We may see little in the way of CAD fluctuations today too as investors await Wednesday’s Bank of Canada policy decision, but Canadian housing starts data from June could influence the currency slightly.

 

Australian Dollar News: AUD Surprisingly Resilient Amid US Dollar Weakness

Despite a lack of fresh domestic support for the Australian Dollar and persistent uncertainties about the US-China trade war, the Australian Dollar saw a strong performance on Monday.

The risky currency climbed away from its recent lows as investors sold the US Dollar (USD). Strong performance in Chinese markets bolstered Australian Dollar demand too.

AUD investors will continue to react to trade developments today, as well as Australia’s June business confidence survey results from NAB.

 

Upcoming Data

Tuesday, 10th July

14:30     Australian NAB Business Confidence

07:45     French Industrial Production

09:30     UK Trade Balance

09:30     UK Industrial and Manufacturing Production

09:30     UK Monthly Growth Rate

10:00     ZEW Eurozone and German Economic Sentiment

13:15     Canadian Housing Starts

 

David Bayliss 

Currency Dealer

dbb@fcgworld.co.uk

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