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Sterling Briefly Jumps on Latest Brexit Developments, Bank of Canada (BoC) Leaves Rates Frozen

Pound News: Could UK and Germany Drop Key Brexit Demands?

The Pound briefly surged on Wednesday afternoon after Bloomberg reported that the UK and Germany had dropped some major sticking points and disagreements in Brexit negotiations.

The report indicated that the nations were more willing to accept a less-detailed agreement rather than allowing negotiations to fall through. Sterling was also modestly supported by the day’s UK services PMI, which beat forecasts.

As there will be no notable UK data due for publication for the remainder of the week, Brexit developments are likely to remain the primary driver of Pound movement today.

 

Euro News: EUR Losses Limited as Eurozone PMI Edges Higher

The Pound to Euro exchange rate jolted higher on Brexit news on Wednesday, but the Euro managed to hold its own thanks to the day’s Eurozone data.

Despite German PMIs and Eurozone retail sales disappointing investors, the Eurozone’s services and composite PMI prints were solid, with the composite print even beating forecasts and rising from 54.3 to 54.5.

The Euro is likely to remain driven by the strength of its rivals today, though Germany’s July factory orders results could prove influential. Investors are also anticipating Friday’s Eurozone growth rate projections.

 

US Dollar News: Disappointing US Trade Data Dampens USD Demand

Despite US President Donald Trump’s protectionist trade rhetoric and attempts to lighten the US trade deficit, the deficit worsened as many analysts expected in July.

This weighed slightly on the US Dollar, although the currency continued to benefit from demand for safe-havens.

While unlikely to be highly influential, especially ahead of Friday’s US Non-Farm Payroll stats, today’s US non-manufacturing PMI from ISM has the potential to influence the US Dollar today.

 

Canadian Dollar News: Bank of Canada (BoC) Leaves Rates Frozen

As analysts expected, the Bank of Canada (BoC) opted to leave Canadian monetary policy frozen in its September policy decision on Wednesday afternoon.

The bank noted trade uncertainty as one of the reasons for its caution – which investors became more concerned about when US-Canada trade talks failed to reach an agreement last week. This left the Canadian Dollar unappealing on Wednesday and GBP/CAD easily surged.

As the US and Canada are set to re-enter trade negotiations this week, Canadian Dollar investors will focus on potential trade developments today.

 

Australian Dollar News: GBP/AUD Surges Despite Strong Australian Growth

Wednesday saw the publication of Australia’s Q2 Gross Domestic Product (GDP) growth rate report, which came in well above expectations in both quarterly and yearly prints.

However, thanks to the day’s news that the UK and Germany could drop some disagreements over Brexit negotiations, the Pound to Australian Dollar exchange rate quickly recovered its losses and touched a new 3-month-high.

As the Australian Dollar remains unappealing due to concerns about US trade protectionism, today’s Australian trade balance data could be influential if it surprises investors.

 

Upcoming Data

Thursday, 6th September

02:30    Australian Trade Balance

07:00    German Factory Orders

08:30    German Construction PMI

13:15    US ADP Employment Change

13:30    US Non-Farm Productivity

15:00    US Factory Orders

15:00    US ISM Non-Manufacturing PMI

 

Alastair Archbold

Currency Trader

aja@fcgworld.co.uk

 

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