Pound Rocked by Political Uncertainty Following Rudd Resignation
[vc_row][vc_column][vc_column_text]The pound got off to a mixed start this week, with investors initially skittish in reaction to the resignation of the Home Secretary, Amber Rudd.
Sterling is holding steady this morning, with GBP/EUR muted at €1.1402, GBP/USD subdued at $1.3752 and GBP/CAD flat at C$1.7656. At the same time GBP/AUD and GBP/NZD are also largely unchanged this morning as they hold at AU$1.8281 and NZ$1.9566 respectively.
The UK will publish its latest manufacturing PMI later this morning, with the pound likely to weaken if the index prints lower, as forecast…
What’s been happening?
The pound traded erratically on Monday as markets were unsettled by Rudd’s resignation.
The departure of one of Theresa May’s few pro-EU allies within her cabinet rippled across currency markets yesterday morning, with investors concerned this could tip the balance in favour of those in the government who favour a more hard-line approach to Brexit.
However the Pound was still able to press higher by the end of the session as the government was defeated on a key Brexit bill, which will potentially see Parliament given a greater say on any Brexit deal.
The GBP/EUR exchange rate got off to a solid start this week as the euro was undermined by some weaker-than-expected inflation from Germany.
Analysts suggested the surprise drop in core inflation is likely to validate the European Central Bank’s (ECB) decision to maintain its cautious attitude and could see the bank leave its ultra-loose monetary policy in place for some time to come.
Meanwhile the GBP/USD exchange rate was notably subdued on Monday as the latest US PCE Price Index revealed domestic inflation ticked up to 2% in March, prompting speculation the Federal Reserve may strike a more hawkish tone in its policy meeting later this week.
What’s coming up?
The pound could be forced to retreat again later this morning following the release of the UK’s latest PMI figures.
Economists forecast activity in the UK’s factory sector will have slowed in April, with the manufacturing PMI expected to have fallen from 55.1 to 54.8.
This would leave activity at its lowest levels since February and is unlikely to inspire hope that the UK economy may pick up the pace in the second quarter.
At the same time movement in the euro is likely to remain subdued on Tuesday amid a lull in domestic data, with investors possibly bracing for the release of the Eurozone’s first quarter GDP figures on Wednesday.
Meanwhile the US will publish its own Manufacturing PMI later this afternoon, with the US dollar possibly strengthening again if it prints in line with expectations and US factory sector activity is shown to have remained relatively strong last month.
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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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