The pound started off the week in a position of strength yesterday, rising against most of the majors, although falling back against the higher-yielding Australian and New Zealand dollars. This morning it has advanced again and is riding at a four-week high against the US dollar.
Sterling has started the day in a position of strength, with GBP/EUR up slightly at €1.1577, GBP/USD up at $1.3144 and GBP/CAD also up at C$1.7366, while GBP/AUD and GBP/NZD are making up for yesterday’s losses and have risen to AU$1.8375 and NZ$1.9105 respectively.
Following on from news that Theresa May has officially delayed the Brexit ‘meaningful vote’ for two weeks, markets will be looking for further signs that Brexit itself could be delayed.
What’s been happening?
News that the British government had delayed the parliamentary Brexit vote until 12 March allowed the pound to sustain last week’s gains against most of its peers yesterday.
With rumours that the EU may be prepared to delay Brexit for up to two years, and potentially extend the transition period to allow a fully managed deal to be reached, Sterling demand was considerably bolstered.
At the same time, there has been a major risk-on move throughout markets following Donald Trump’s announcement that he was considering delaying the latest round of China tariffs, thus stoking demand for global risk correlated currencies while diminishing it for safe havens.
What’s coming up?
UK mortgage approvals figures will be published today but they are unlikely to be overly influential for Sterling. Instead, the pound is still likely to remain on a hair trigger over any new signals on Brexit.
For the Euro, as the US dollar weakens following China-US trade news, the single currency has generally benefitted, and could today be driven by German and French consumer confidence stats.
With a US-China trade deal looking more likely, markets saw a falloff in demand for the safe haven US dollar yesterday and are likely to continue to move into risk correlated currencies today.
Yesterday’s US data did little to drive USD, but today’s US housing starts and building permits could cause some movement. Furthermore, Federal Reserve Chair Jerome Powell’s testimony to Congress could influence USD as well, as could the Richmond Fed Manufacturing Index figures.
For the New Zealand dollar, the latest trade balance figures are out this evening, which will give NZD traders an idea about how the export-driven economy is faring.
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