‘No-deal’ Brexit fears drive pound lower
[vc_row][vc_column][vc_column_text]Brexit worries picked up once again during the course of the last week, with the deadline for the conclusion of withdrawal treaty talks pushed back from October to November.
In the wake of the bank holiday weekend the pound still looks a little sluggish, maintaining its downside bias against both the euro and US dollar.
With the Federal Reserve Chair unexpectedly taking a slightly less hawkish tone on monetary policy this has helped to shore up commodity-correlated currencies such as the Australian and New Zealand dollars.
Politics is expected to remain the major driver of market sentiment in the week ahead, with tensions over Italy rising and markets watching for the latest development in the US trade strategy.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]Euro looks vulnerable as tensions rise over Italian budget
A mixed raft of Eurozone manufacturing and services PMIs limited the potential for euro gains last week as confidence in the outlook of the currency union remained muted.
Although the sense of market unease over the Turkish currency crisis has eased in recent days the euro has struggled to return to a stronger footing against its rivals.
And while the risk of contagion from Turkey spreading into the European banking sector has eased, tensions between the Italian government and the EU began to escalate once again.
With Italy still intent on following through with spending plans that would conflict with EU budget rules, the stability of the currency union appears a little shakier.
However, the mood towards the single currency could improve in the days ahead on the back of August’s German and Eurozone consumer price index data.
As long as inflation within the Eurozone continues to run above the European Central Bank’s (ECB) 2% target the odds of policy action in the months ahead are set to improve.
Solid Eurozone unemployment data could give investors an additional incentive to favour the euro over its rivals[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
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* Information courtesy of Currencies Direct, Philip McHugh
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information. This article was written by Currencies Direct.
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