The possibility that the UK government will opt to leave the single market altogether is weighing on GBP EUR and GBP USD exchange rates. A ‘hard’ Brexit raises questions over the UK’s vital financial services passporting rights, making the possibility of a complete break away from the EU highly concerning to the UK’s key economic sector.
The Euro is recovering on US Dollar weakness, with the ‘Greenback’ soft ahead of the imminent US presidential election debate.
Mixed Picture From US Durable Goods Orders Provides Some USD Support
16.55, 28/09/2016: The latest US durable goods orders figure has provided a small boost for the US Dollar, although the data was largely mixed. Orders stagnated instead of declining by -1.5%, but the previous month’s growth was revised down from 4.4% to 3.6%.
USD, EUR Soften; GBP Inches into Positive Territory
12.05, 28/09/2016: Both the Euro and the US Dollar have softened today. Concerns over the German banking sector are weighing on the common currency, while the US Dollar is soft as traders await today’s quartet of Federal Reserve official speeches. This has allowed the Pound to creep into the positive side of opening levels after spending much of the morning session in negative territory.
GBP EUR has risen to 1.1604, while the GBP USD exchange rate has climbed to 1.3018.
Pound Bullish vs Euro, Holds Opening vs US Dollar
14.25, 27/09/2016: The Pound has made a strong recovery versus the Euro, leaping out of negative territory to advance 0.4%, while clawing back losses against the US Dollar. Sterling is on the rise as traders begin to wonder if the earlier sell-off was overdone. With the Pound around post-Brexit lows, investors are viewing Sterling as an attractive buying opportunity.
GBP EUR is currently trending around 1.1571 and GBP USD is currently trading in the region of 1.2967.
17.00, 27/09/2016: The Pound has received further support today from a surprising source – a dovish World Trade Organisation (WTO) forecast. While the WTO expects growth to slow, the fact that the body does not predict a UK recession in 2017 has cheered investors.
Brexit Fears Continue to Weaken Pound (GBP) Exchange Rates
The Pound is currently weak against the Euro, although US election jitters are allowing Sterling to make small gains on the US Dollar. Markets are once-again speculating over the potential shape of the Brexit, with fears of a ‘hard Brexit’ softening appetite for the Pound.
News today has not been supportive of Pound gains, with sentiment amongst financial services now having fallen for the longest streak since the financial crisis in 2009. Additionally, a new poll by KPMG shows that 76% of UK CEOs are already pondering the idea of relocating and would consider doing so after the Brexit.
Additionally, the latest figures from the British Bankers Association (BBA) have shown that the number of mortgage approvals made in August fell to a 19-month low. The figure was lower-than-expected, with approvals weakening from 37,672 to 36,997, marginally below the 37,100 expected.
Euro (EUR) Advances as German Confidence Scores Improve Powerhouse Outlook
Strong German sentiment scores buoyed the Euro, allaying fears that the Eurozone’s powerhouse economy was being to drag on growth in the bloc. Recent German economic data was largely negative; in many cases the figures overwhelmed more positive results from elsewhere in the bloc to drag down aggregate Eurozone performance.
However, the latest IFO survey scores have shown a stronger-than-expected rise in sentiment, suggesting German businesses remain in a healthy condition despite fears otherwise. The business climate index climbed from 106.2 to 109.5, the current assessment from 112.8 to 114.7 and the expectations measure from 100.1 to 104.5.
This improved the outlook for the German economy, with Citi’s Christian Schulz claiming:
‘Given the strong fundamentals for domestic demand, we expect the services PMI to rise in coming months and converge more with the picture painted by the Ifo.’
Approaching US Presidential Election Debate Causes US Dollar (USD) Exchange Rates to Weaken
With Democrat Hillary Clinton just barely in the lead in the polls, markets are nervously awaiting the upcoming televised presidential debate. Although Clinton leads over nearest rival Donald Trump by 2% when all eligible parties are included, the two candidates are tied at 46% in a head-to-head contest. The upcoming debate is a chance for either candidate to pull ahead, but worries that it may be Trump who does so are keeping the US Dollar weak.
Trump’s economic policies have been widely criticised and are viewed as detrimental to the US economy by markets. Therefore any sign that Trump was the dominant candidate would cause severe market skittishness as the November election draws closer.
GBP EUR, GBP USD Exchange Rate Forecast; US Data Slew Dominates Calendar
UK data is thin on the ground, but if the CBI retailing report sales figure drops from 9 to 5 as forecast this could weaken the Pound.
Eurozone data is virtually non-existent and the Euro may respond instead to market sentiment after the results of the upcoming presidential debate.
If the debate changes the election outlook little, the US Dollar could still be moved by September’s consumer confidence figure, which is forecast to weaken from 101.1 to 98.8.
GBP, EUR, USD Exchange Rates
The Pound Euro (GBP EUR) exchange rate is currently trending in the region of 1.1516, while the Pound US Dollar (GBP USD) exchange rate is currently trending in the region of 1.2980.