Pound Leaps as UK and EU Publish Joint Brexit Treaty Draft

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  • Falling Copper and Iron Ore Prices Lead AUD Exchange Rates Lower – Global trade anxieties limit Australian Dollar appeal
  • Sterling Surged Higher on Brexit Breakthrough – UK and EU secure agreement over citizens' rights and financial settlement
  • Hawkish ECB Comments Benefit Euro – Policymakers sound more optimistic note on inflationary outlook
  • New Zealand Dollar Lacks Momentum Ahead of RBNZ Meeting – 'Kiwi' under pressure as interest rates expected to remain on hold

Australian Dollar

Fresh sell-offs in iron ore and copper prompted the Australian Dollar to shed ground at the start of the week, with markets demonstrating renewed jitters over the prospect of a global trade war. The lingering threat of the US administration levelling additional tariffs on China left investors in a distinctly risk-averse mood. There consequently appeared little reason to favour the commodity-correlated 'Aussie' on Monday, given the antipodean currency's vulnerability to any significant deterioration in the global economy.

Unless the Reserve Bank of Australia's (RBA) March meeting minutes prove unexpectedly hawkish in nature AUD exchange rates are likely to remain under some degree of pressure today.


The Pound surged higher during Monday's European session thanks to an unexpected breakthrough in Brexit negotiations. Markets reacted positively to the publication of a new, joint EU-UK draft treaty which outlined agreement in a number of areas, including citizens' rights and the financial settlement. This naturally boosted hopes the talks are progressing, reducing the risk of the UK suffering an unceremonious crash out of the EU in March 2019. Although disagreements remain this was enough to boost Sterling across the board.

Even so, a disappointing showing from tonight's UK consumer price index data could see GBP exchange rates return to a softer footing.


While the Eurozone trade surplus narrowed further than forecast in January this failed to keep EUR exchange rates on an entirely weaker footing. Demand for the single currency was supported by the latest commentary from European Central Bank (ECB) policymakers. As two members of the ECB Governing Council took a more optimistic tone on the subject of the inflation outlook the Euro found some cause for confidence.

With forecasts pointing towards a dip in the ZEW economic sentiment surveys, however, the mood towards the Euro is likely to deteriorate once again.

US Dollar

Uncertainty over the outlook of the Trump administration continued to weigh on the appeal of the US Dollar, as investors remain on their toes. The threat of a prospective trade war with China remains a drag on USD exchange rates, given the negative impact that such a policy could have on the US economy in turn. As long as the US continues to shift towards a more protectionist stance on trade, and a sense of political risk remains, the upside potential of USD exchange rates is likely to remain limited.

As anticipation builds for the latest Federal Reserve interest rate decision the mood towards the US Dollar seems unlikely to particularly improve.

Canadian Dollar

Although oil prices slipped once again the damage was limited by persistent tensions between Iran and Saudi Arabia. With the two major OPEC producers at loggerheads over the preferred level of oil prices the future of the production-limiting agreement looks rather fraught. Even so, the Canadian Dollar was still able to benefit from the relative weakness of the US Dollar on Monday.

As January's Canadian wholesale trade sales figure is expected to show a solid rebound on the month this should offer CAD exchange rates some degree of support overnight.

New Zealand Dollar

A slight loss of momentum from the latest New Zealand services PMI left NZD exchange rates lacking in any particular rallying point on Monday. With the Reserve Bank of New Zealand (RBNZ) still widely expected to leave interest rates on hold this week demand for the 'Kiwi' remains limited. As risk appetite is still heightened by fears of a US-instigated trade war the New Zealand Dollar has seen little in the way of support.

Any dip in the first quarter Westpac consumer confidence index should keep NZD exchange rates under pressure in the near term.

Data Released

March 20th 07:00 NZD Westpac Consumer Confidence (1Q)
March 20th 10:00 AUD RBA March Meeting Minutes
March 20th 19:30 GBP Consumer Price Index (YoY) (FEB) 2.8%
March 20th 20:00 EUR German ZEW Economic Sentiment Survey (MAR) 13
March 20th 22:30 CAD Wholesale Trade Sales (MoM) (JAN) 0.4%

Post by TorFX

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