Pound under pressure from BREXIT deal
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Pound under pressure as MPs push back against Brexit deal
Pound exchange rates slumped sharply on Thursday last week after Brexit secretary Dominic Raab unexpectedly resigned in protest against at Theresa May’s proposed Brexit deal.
This reversed the positive impact of the initial news that the UK and EU had finally reached an agreement, also putting a dampener on the euro.
A contraction in Germany’s third quarter gross domestic product added to the bearish tone of the single currency, suggesting a sustained slowdown in growth.
While the US economy showed some signs of weakness, meanwhile, this was not enough to keep the US dollar under pressure for long.
The general sense of market risk aversion also limited the appeal of the Australian and New Zealand dollars, in spite of solid domestic data.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
Brexit discontent drags pound down
As MPs pushed back against the proposed Brexit deal, and a number of ministers resigned from their posts in protest, this weighed heavily on the pound.
Growing discontent within the Conservative ranks gave investors incentive to pile out of the pound ahead of the weekend.
Markets were naturally spooked by the heightened prospect of a vote of no confidence against Theresa May, creating the potential for further political disruption before the end of the year.
Disappointing UK retail sales figures added to the sense of GBP bearishness on Thursday, with sales showing a surprise -0.4% contraction on the month.
This all encouraged investor worries over the outlook of the UK economy as markets reduced the odds of a 2019 Bank of England (BoE) interest rate hike.
However, as the initial anxiety fades the pound should recover at least some of its lost ground in the near term.
Wednesday’s public sector net borrowing data may give GBP exchange rates a rallying point, meanwhile, if the figure points towards a narrowing of the budget deficit.
Evidence of greater fiscal resilience should encourage the pound to return to a stronger footing against its rivals, unless political risks flare up once again.[/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
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)
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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