Reduced odds for a no-deal Brexit drive pound higher
[vc_row][vc_column][vc_column_text]Last week saw GBP investors cheer news that UK and EU negotiators had reached a consensus, sharply reducing fears for a no-deal outcome in October and boosting the pound across the board.
The Democratic Unionist Party (DUP) refused to endorse the proposed deal, with Arlene Foster claiming the agreement ‘traps’ Northern Ireland in the single market and customs union.
The Irish voice failed to sway investor confidence, however, and GBP traders welcomed the deal.
But without DUP approval, Prime Minister Boris Johnson faced a shortfall in support when the deal reached parliament in a rare Saturday vote. This failed to make any impact as MPs opted to delay the decision until legislation to implement the deal can be passed.
Johnson plans to pass the vote through parliament this week, but faces a battle of wills, with Labour seeking Tory rebel support for the dissenting vote and the Democratic Unionist Party (DUP) continuing to denounce the deal.
Unless the Prime Minister can find the numbers to push his Brexit deal through parliament, GBP exchange rates may struggle to hold onto their positive footing in the days ahead.
Largely overshadowed by Brexit headlines, this week’s only notable ecostat is the CBI business optimism index which is expected to slip further into negative territory as the end of the year approaches.
Single currency under pressure as Eurozone sentiment continues to sour
A better-than-expected set of ZEW economic sentiment indexes failed to shore up the euro as fresh US tariffs came into force on a range of EU produce and market confidence in the health of the Eurozone economy declined.
Even though sentiment in both Germany and the wider Eurozone defied forecasts, the indexes still sank further into negative territory, highlighting lingering concerns for the EU economy.
Worries over trade intensified when the US introduced 25% tariffs on a number of EU products with the knock-on effect predicted to be a slowdown in export volumes.
Signals from the Bundesbank, meanwhile, indicated a perceived growth contraction in the Q3 German economy, feeding into speculation that the Eurozone’s powerhouse economy may be heading for a recession.
Recession fears could rise if EU manufacturing and services PMIs for October prove underwhelming, with an ongoing state of contraction in the manufacturing sector likely to see the euro struggle against its rivals.
Dovish signals from the European Central Bank (ECB) at this week’s policy meeting could also fuel a euro sell-off.[/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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