Potential Brexit Deadline Extension Prompts Pound Surge

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  • Australian Dollar Shakes off Weaker Consumer Confidence – Market risk appetite continues to support AUD exchange rates
  • Pound Surges to Multi-Month Highs on Hopes of Brexit Deadline Extension – Lower odds of no-deal Brexit support GBP gains
  • NZD Exchange Rates Soften Ahead of Trade Data – Return to trade deficit could drag New Zealand Dollar lower
  • Federal Reserve Looks Set to Leave Interest Rates on Hold – US Dollar weighed down by Powell comments

Weaker Consumer Confidence Fails to Dent Australian Dollar

Although the ANZ Roy Morgan weekly consumer confidence index failed to show an improvement this was not enough to knock back the Australian Dollar yesterday. As the odds of the Federal Reserve raising interest rates in the near future diminished further this encouraged the risk-sensitive AUD to hold onto a stronger footing. The persistent sense of market optimism over the prospect of a US-China trade agreement also offered support to AUD exchange rates.

With no fresh Australian data set for release today, however, the mood towards the Australian Dollar could soon start to sour.

Hopes of Brexit Deadline Extension Boost Pound

As Theresa May promised MPs a vote on extending the Brexit deadline this gave the Pound a solid boost across the board. GBP exchange rates climbed to multi-month highs in the wake of May’s speech, even though the risk of a no-deal Brexit has not been taken off the table. With Labour indicating potential support for a second referendum the appeal of the Pound improved further, with investors betting on the UK still avoiding a harder form of Brexit.

A slowdown in the BRC shop price index could see the Pound come under renewed pressure this morning, though, as worries over the economic outlook remain.

Euro Fails to Benefit from Policymaker Commentary

Positive comments from European Central Bank (ECB) policymaker Philip Lane failed to encourage EUR exchange rates to return to a stronger footing last night. Even though Lane indicated that the weakness in recent economic data is only likely to require a small adjustment to the ECB’s forecasts this was not enough to boost the single currency. As markets still see the ECB leaning towards dovishness in the near future the appeal of the Euro remained muted.

With no change forecast for February’s finalised Eurozone consumer confidence index the potential for EUR exchange rate gains looks limited today.

Fed Chair Comments Weigh on US Dollar

Commentary from Federal Reserve Chair Jerome Powell left the US Dollar under pressure last night as he reiterated the need for patience on the matter of interest rates. With the Fed looking set to leave its monetary tightening cycle on pause for the time being USD exchange rates trended lower. Although Powell expressed confidence in wage growth and the outlook of the labour market this was not enough to support demand for the US Dollar overnight.

A decline in tonight’s advance goods trade balance could weigh heavily on the US Dollar.

Oil Weakness Keeps Canadian Dollar on Back Foot

CAD exchange rates remained under pressure thanks to the latest drop in oil prices as the wider sense of market risk appetite soured. Investors saw little reason to favour the Canadian Dollar ahead of tonight’s important consumer price index data, which is forecast to show a fresh slowdown. With investors concerned by the prospect of an increasingly dovish Bank of Canada (BOC) the strength of CAD exchange rates was naturally muted.

If the consumer price index weakens as forecast this is likely to leave the Canadian Dollar on a weaker footing.

New Zealand Dollar Stalls Ahead of Trade Data

In the absence of fresh domestic data the New Zealand Dollar struggled to hold onto its bullishness, even as markets continued to bet on the prospect of a US-China trade agreement. This dented NZD exchange rates ahead of this morning’s raft of trade data, although the weaker US Dollar still offered some support to the antipodean currency.

NZD exchange rates look vulnerable to fresh losses if the trade balance falls back into a state of deficit in January.

Data Releases

February 27th 08:45    NZD    Trade Balance (JAN)    -300 million
February 27th 11:01    GBP    BRC Shop Price Index (YoY) (FEB)    0.3%
February 27th 21:00    EUR    Eurozone Consumer Confidence Index (FEB F)    -7.4
February 28th 00:30    CAD    Consumer Price Index (YoY) (JAN)    1.4%
February 28th 00:30    USD    Advance Goods Trade Balance (DEC)    -74.5 billion

Post by TorFX

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