The pound strengthened against the majority of its peers yesterday, lifted by a sense of renewed Brexit optimism.y.
Sterling appears to be consolidating its gains this morning, with GBP/EUR muted at €1.1628, GBP/USD stable at $1.3057 and GBP/CAD flat at C$1.7475, while GBP/AUD and GBP/NZD both hold steady at AU$1.8504 and NZ$1.9619 respectively.
In focus today will be the conclusion of Federal Reserve’s latest policy meeting, potentially weakening the US dollar if the bank strikes a more cautious tone.
What’s been happening?
The pound rallied yesterday, spurred higher on the back of fresh Brexit optimism regarding the cross-party talks.
GBP exchange rates strengthened amid reports of progress as the Conservatives and Labour make a final push to find a workable Brexit deal.
Sterling sentiment was further lifted by Labour’s announcement it would support a second referendum on Brexit if a deal with the government was not reached and an election is not called.
This Brexit optimism resulted in the GBP/EUR exchange rate rising to a three-week high on Tuesday despite the publication of some solid economic data in the Eurozone yesterday, with the euro strengthening in broader trade as the bloc’s Q1 GDP beat expectations.
Meanwhile, the GBP/USD exchange rate jumped around a cent yesterday, with demand for the US dollar sinking in the face of some strong Eurozone data and caution ahead of the Federal Reserve’s rate decision later today.
What’s coming up?
Looking ahead, the spotlight today will undoubtedly be on the Federal Reserve’s rate decision later this evening.
No policy changes are expected from the bank this month, but USD investors will be looking out for any change in tone regarding the economy, with the US dollar likely to weaken if the bank appears more dovish in its outlook for 2019.
Meanwhile, GBP investors will be focused on the publication of the UK’s latest manufacturing PMI this morning, with the pound likely to weaken if factory activity slowed in line with expectations in April.
Finally, expect to see thin trade in the euro today as European markets close for International Workers’ Day, potentially resulting in EUR exchange rates drifting lower.
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