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Sterling Tumbles on Brexit Jitters while European Central Bank Reveals New Stimulus

 

Pound News: Fears of UK-EU Negotiations Dead-End Knocks Sterling

Sources speaking to Reuters yesterday said that talks between the UK and EU regarding the UK government’s Brexit deal had hit an impasse. It suggested that the government would fail to change the deal in any way that would make it more appealing to critics.

The source said that the EU was not going to adjust its stance to suit the UK, while the EU has indicated since before negotiations reopened that its positions would not change. Sterling tumbled as investors became concerned that Brexit would remain deadlocked even if the process is formally delayed.

UK consumer inflation expectations data will be published tomorrow, but it is unlikely to influence Sterling much. Instead, investors will be focusing on potential Brexit developments and anticipating next week’s ‘meaningful’ Parliament Brexit vote.

 

Euro News: European Central Bank Reveals New Stimulus and Plans to Not Raise Rates in 2019

After taking a cautious ‘wait and see’ stance in previous months, the European Central Bank (ECB) had a more dovish reaction to the latest disappointing Eurozone ecostats in yesterday’s March policy decision.

As was expected, the bank left Eurozone monetary policy frozen. The Euro weakened as the bank also confirmed its bearish outlook, saying that it would introduce fresh economic stimulus to the Eurozone and indicating that interest rates would not be hiked at all until next year at the earliest.

Demand for the Euro is unlikely to improve much today, but it could avoid further losses if investors perceive this morning’s German and French factory stats as impressive. France’s January trade balance figures may also prove influential.

 

US Dollar News: Weakness in Rivals Keeps US Currency Appealing

With Brexit uncertainty revived, and the European Central Bank (ECB) taking a more dovish stance on monetary policy, the US Dollar has benefitted as a currency that is seen as safe and reliable in times of market uncertainty.

The US Dollar also commonly benefits from weakness in its major rivals, and as the Euro is the US Dollar’s biggest rival, the latter’s losses yesterday further bolstered US Dollar demand.

There is potential for the US Dollar to weaken before the end of the week though, if Friday’s anticipated US Non-Farm Payroll results from February fall short of analysts’ expectations.

 

Canadian Dollar News: Canadian Dollar Demand Limited Following Dovish Bank of Canada Tone

The Canadian Dollar floundered for most of yesterday’s session, as investors continued to digest the more dovish tone that the Bank of Canada (BoC) took during its policy decision on Wednesday.

Most notably, the bank noted that the global slowdown was worse than previously expected and indicated that Canadian interest rates should stay below neutral for now. The commodity-correlated Canadian Dollar benefitted against a weaker Pound thanks to stronger oil prices, but still only regained some of yesterday’s losses.

This week’s most influential Canadian data will be published today. If Canada’s latest job market results beat expectations they could offer the Canadian Dollar some stronger support.

 

Australian Dollar News: Weak Australian Retail Stats Keep ‘Aussie’ Under Pressure

While the Pound to Australian Dollar exchange rate shed some of the week’s gains yesterday, this was more due to Brexit uncertainties than Australian Dollar strength.

The Australian Dollar remained pressured by Reserve Bank of Australia (RBA) interest rate cut bets, and demand for the ‘Aussie’ was further pressured following the publication of yesterday’s Australian retail sales results, which only rebounded to 0.1% rather than the expected 0.3%.

No notable Australian data is expected today, leaving the Australian Dollar’s movement to be influenced by shifts in market risk-sentiment.

 

Upcoming Data

 

Friday, 8th March

07:00    German Factory Orders

07:45    French Industrial Production

07:45    French Trade Balance

13:15    Canadian Housing Starts

13:30    Canadian Job Market Report

13:30    US Non-Farm Payroll Report

 

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To keep up to date with the Euro, visit the Euro blog in our Currency News section.

 

Arron Morris

Senior Currency Broker

adm@fcgworld.co.uk

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