Sterling was on mixed form yesterday, initially rising higher against the majors on a wave of Brexit optimism, but later slipping back on mixed signals from the EU.
Chief EU negotiator Michel Barnier, had earlier said that the EU was ‘prepared to offer Britain a partnership such as there never has been with any other third country,’ but later qualified his comments saying ‘… but that includes a “no-deal” scenario.’
This morning, GBP/EUR is down 0.25% at €1.1129, GBP/CAD is up at C$1.6930 and GBP/USD is dead flat at $1.3011. GBP/AUD is currently up slightly at AU$1.7941 and GBP/NZD is unmoved at NZ$1.9553.
What’s been happening?
Most Sterling movement yesterday was caused by political developments related to Brexit, with traders confused as to whether a deal was forthcoming or if the UK was still on course to crash out of the EU without one.
The Canadian dollar was able to take advantage of the pound’s weakness as some better-than-expected Canadian GDP figures revealed the economy had grown 0.7% in Q2, up from 0.4% in the previous quarter.
The US dollar also benefitted from some decent data releases, but was unable to hold its ground against the pound nonetheless. Core personal consumption slowed a slight rise in July, from 1.9% to 2%, with some similarly supportive jobless claims adding a positive sheen to dollar sentiment.
In the UK, some disappointing consumer credit figures pointed to slowing confidence in the economy, with net lending to individuals in July coming in at £4bn, which was below the forecast £5.5bn.
Aside from the majors there was some pain for currencies in emerging markets, with the pound gaining some 4.5% against the Turkish Lira, and 2.5% against the South African Rand.
What's coming up?
The pound is likely to come under further pressure this morning when the latest GfK consumer confidence survey is published. Economists currently think sentiment will remain at a low -12 points, sinking further from the previous score of -10. For context, since 1981 the average GfK consumer confidence score has been -8.97, with a low of -39 being hit in July 2008.
In terms of the euro, we have French inflation figures, Spanish and German sales stats and Denmark’s GDP figures to look forward to – as well as the overall Eurozone CPI numbers from August - all of which could influence the GBP/EUR rate.
Across the pond, the Michigan Consumer Sentiment Index will give USD traders an idea about the current direction of the US economy, with signs pointing to a slight uptick in the index for August.
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