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Threat of Brexit Talks Collapsing Hits Sterling as Safe Haven Demand Rises

oPound News: Sterling Sheds Last Week’s Gains as UK Political Uncertainties Flare Up

Since the beginning of the week, hopes that the UK government and opposition Labour Party were getting closer to reaching a compromise on Brexit have faded. This has been the primary cause of the Pound’s significant losses this week so far.

After Cabinet Office Minister David Lidington confirmed that Britain would take part in EU elections, reports began to suggest that the cross-party negotiations could collapse as parties begin to prioritise EU election campaigning instead.

UK data is unlikely to be influential today. Instead, investors will be focused on political developments. If cross-party Brexit negotiations appear unsalvageable, the Pound could continue to tumble for the remainder of the week.


Euro News: Could German Economy be More Resilient than Expected?

Despite the Euro’s poor performance last week, and lingering market concerns about the strength of the Eurozone’s economic outlook, the single currency was one of yesterday’s strongest performing majors.

This was because investors became more hopeful about Germany’s economic outlook, following a German industrial production report which beat expectations, bolstering hopes that the Eurozone’s leading economy performed better than feared in Q1.

No notable Eurozone data will be published today, but for now Euro investors are anticipating tomorrow’s German trade balance report and next week’s German growth rate stats.


US Dollar News: Trade Uncertainties Leaves US Dollar Strength Limited

While investors found safe haven currencies like the US Dollar more appealing following the latest rise in US-China trade tensions, the US Dollar was not able to benefit as strongly from this news as other stable currencies.

This is because analysts are concerned the US economy will be negatively impacted by US-China trade action. The US Dollar has been riding high recently, so investors are hesitant to buy into it too much at present.

The US Dollar could see stronger support today if upcoming trade balance data and wholesale inventories data from March beats expectations or if the US trade outlook improves.


Canadian Dollar News: Strong Canadian Housing Data Offers Support to CAD

Most trade-linked currencies like the Canadian Dollar saw weaker performance yesterday, as concerns that US-China trade negotiations could fail caused global trade concerns.

On top of this, oil prices tumbled and put additional pressure on CAD. Despite these factors, the Canadian Dollar registered solid gains against a weaker Pound due to some stronger-than-expected Canadian housing starts data from April.

Furthermore, the Canadian Dollar’s fortunes could worsen if today’s upcoming trade balance data or tomorrow’s jobs market stats disappoint investors and have a negative impact on the economic outlook.


Australian Dollar News: AUD Gains Limited as Investors Avoid Trade-Correlated Currencies

The Australian Dollar saw mixed movement yesterday. Initially, concerns about the recently reignited US-China trade tensions left the Australian Dollar’s strength limited, but towards the end of the day US President Donald Trump expressed confidence that a trade deal would be agreed and this bolstered AUD demand.

However, AUD gains against a weak Pound were limited overall following the Reserve Bank of New Zealand (RBNZ) cutting interest rates on Wednesday, which had the effect of making investors even more hesitant to buy risk sensitive currencies.

The Reserve Bank of Australia (RBA) will publish a statement on monetary policy tomorrow, but today the Australian Dollar is more likely to be driven by shifts in trade sentiment.


Upcoming Data


Thursday, 9th May

13:30    Canadian Trade Balance

13:30    Canadian New Housing Price Index

13:30    Fed Chairman Powell Speech

13:30    US Trade Balance

15:00    US Wholesale Inventories


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


David Bayliss

Senior Currency Broker

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