Pound Flounders as MPs Fail to Make Brexit Breakthrough

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  • Increasing Odds of RBA Interest Rate Cut Weigh Down Australian Dollar – Weak private sector credit data could add to bearishness
  • Pound Under Pressure as MPs Fail to Find Brexit Consensus – Lack of certainty over political outlook drags GBP exchange rates down
  • Disappointing German Inflation Limits Euro Appeal – Chances of further ECB dovishness rise
  • Soft Business Confidence Adds to New Zealand Dollar Downside – Disappointing consumer confidence index could extend NZD losses

Australian Dollar Softens on Rising Odds of RBA Rate Cut

As markets continued to react to the Reserve Bank of New Zealand’s (RBNZ) unexpectedly dovish policy announcement the Australian Dollar remained on the back foot. With the RBNZ on course to cut interest rates in the months ahead the Reserve Bank of Australia (RBA) is likely to come under pressure to follow suit. This limited the appeal of the Australian Dollar, although AUD exchange rates were able to some support overnight thanks to weaker US growth data.

Any signs of a slowdown in February’s private sector credit figures could put the Australian Dollar under renewed pressure, however.

Lack of Brexit Majority Encourages Pound Selling

After MPs failed to deliver a majority for any of the eight options for Brexit they were offered this left Parliament in a fresh state of gridlock. Markets continue to lack any sense of clarity over the UK’s future relationship with the EU, leaving GBP exchange rates on a weaker footing. Although the motion to hold a second referendum attracted the largest number of votes this was not enough to shore up the Pound.

A further decline in the GfK consumer confidence index could encourage GBP exchange rates to extend their losses.

Surprise German Inflation Fall Weighs on Euro

Investors were disappointed as March’s German consumer price index data fell short of forecast, with the headline inflation rate unexpectedly easing from 1.5% to 1.3% on the year. With inflationary pressure within the Eurozone’s powerhouse economy showing fresh signs of weakening the case for continued European Central Bank (ECB) dovishness increased. This limited the appeal of the Euro as the odds of further monetary loosening picked up.

Even so, the mood towards the single currency could improve this evening if the German unemployment rate shows an improvement on the month.

US Dollar Struggles to Hold Uptrend on Slowing US Growth

In another blow to confidence in the outlook of the US economy the finalised fourth quarter annualised gross domestic product reading was revised down. With growth clocking in at 2.2%, as opposed to 2.6%, this raised fresh doubts over the underlying health of the world’s largest economy. This saw USD exchange rates lose much of their earlier momentum, although market risk appetite still kept the US Dollar on a largely positive footing.

Any disappointment from tonight’s personal consumption expenditure core figure, though, could see the US Dollar taking a bearish turn.

Global Risk Aversion Limits Canadian Dollar Appeal

The increasing sense of global central bank dovishness limited the appeal of the Canadian Dollar, with markets seeing little incentive to buy into the risk-sensitive currency. Weaker oil prices also limited the appeal of the Canadian Dollar as worries over the market outlook persisted. However, the downside potential of CAD exchange rates was muted thanks to investors adopting positions ahead of tonight’s gross domestic product data.

Underwhelming growth data could easily see the Canadian Dollar slump sharply across the board heading into the weekend.

Weakening Business Confidence Keeps New Zealand Dollar Soft

In the wake of the RBNZ’s unexpectedly dovish message the New Zealand Dollar struggled to recover its lost ground. March’s ANZ activity outlook and business confidence indexes offered investors little encouragement, with both showing a fresh decline on the month. As weaker business confidence points towards slower economic growth NZD exchange rates remained biased to the downside yesterday.

A similarly underwhelming reading from this morning’s ANZ consumer confidence index may drive further New Zealand Dollar weakness.

Data Releases

March 29th 08:00    NZD    ANZ Consumer Confidence (MoM) (MAR)    
March 29th 11:01    GBP    GfK Consumer Confidence Index (MAR)    -14
March 29th 11:30    AUD    Private Sector Credit (YoY) (FEB)    4.2%
March 29th 19:55    EUR    German Unemployment Rate (MAR)    4.9%
March 29th 23:30    CAD    Gross Domestic Product (YoY) (JAN)    1.5%
March 29th 23:30    USD    Personal Consumption Expenditure Core (YoY) (JAN)    1.9%

Post by TorFX

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