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Sterling Surges on Hopes of Continued Post-Brexit Single Market Access

Pound News: Prospect of Softer Brexit Boosts GBP Exchange Rates

A report published by Business Insider encouraged the Pound (GBP) to strengthen sharply on Tuesday, stoking bets that a softer Brexit deal could still be on the table.

As the European Parliament was reported to be preparing plans for the UK to receive ‘privileged’ access to the single market after Brexit GBP exchange rates were naturally encouraged to rally.

However, if this morning’s average weekly earnings data fails to show an improvement this could see the Pound quickly reversing its gains.

 

Euro News: Eurozone Consumer Confidence Falls Sharply

February’s ZEW economic sentiment surveys did not offer any particular support to Euro (EUR) exchange rates, with confidence found to have dipped on the month.

With the Eurozone consumer confidence index also showing a sharp decline, falling from 1.4 to just 0.1, there appeared little reason to buy into the single currency yesterday.

Even so, as the latest raft of Eurozone manufacturing and services PMIs are forecast to demonstrate resilient growth EUR exchange rates could find a rallying point today.

 

US Dollar News: USD Exchange Rates Gain Ground Ahead of Fed Minutes

In spite of a lack of fresh domestic data the US Dollar (USD) continued to recover ground, benefitting from the general decline in market risk appetite.

Nevertheless, the underlying fundamentals of this USD exchange rate rally leave something to be desired, given that the impact of an imminent Federal Reserve interest rate hike is already priced in.

This leaves the US Dollar vulnerable to a reversal ahead of tonight’s Federal Open Market Committee (FOMC) meeting minutes, even if the minutes ultimately prove to be hawkish.

 

Canadian Dollar News: Poor Wholesale Sales Exacerbate Economic Worries

In another negative development for the Canadian economy December’s wholesale trade sales figure unexpectedly contracted -0.5% on the month.

With signs largely pointing towards a weaker domestic economy the appeal of the Canadian Dollar (CAD) extended its downtrend further.

Without a marked shift in market risk appetite CAD exchange rates look set to remain on a weaker footing in the near term.

 

Australian Dollar News: AUD Softens As RBA Sounds Cautious Note on Inflation

Although it came as little surprise that the Reserve Bank of Australia (RBA) remained rather cautious in its February meeting minutes this still prompted the Australian Dollar (AUD) to weaken.

While policymakers maintained a rather positive outlook on the wider Australian economy persistent concerns over wage growth and inflation diminished the prospect of any imminent interest rate hike.

As markets are likely to see further jitters ahead of tonight’s Fed minutes AUD exchange rates are unlikely to recover any particular ground.

 

Upcoming Data

Wednesday, 21 February

09:00     Eurozone Manufacturing PMI

09:00     Eurozone Services PMI

09:30     UK Average Weekly Earnings

19:00     US Federal Open Market Committee Meeting Minutes

 

James Baxter 

Currency Dealer

01442 892 062

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