Pound Plunges as Hopes of Brexit Progress Fade

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  • NAB Business Confidence Index Continues Decline – Australian Dollar weighed down as domestic sentiment sours
  • Brexit Developments Fuel Pound Volatility – GBP exchange rates fail to hold onto multi-month highs as May’s deal faces defeat
  • Surprise Decline in US Inflation Dents US Dollar – Fed looks set to maintain cautious policy outlook
  • Solid ANZ Truckometer Encourages New Zealand Dollar Gains – NZD vulnerable to food price data today

Weaker Business Confidence Weighs on Australian Dollar

As the NAB business confidence index eased further in February this put the Australian Dollar under fresh pressure. The decline in sentiment suggests that the Australian economy may remain on the back foot in the near future, giving the Reserve Bank of Australia (RBA) greater incentive to adopt a cautious policy outlook. With markets still concerned by signs of weakness within the Chinese economy AUD exchange rates saw little in the way of support yesterday.

A similar decline in the latest Westpac consumer confidence index could prompt the Australian Dollar to shed further ground this morning.

Pound Slumps as Brexit Uncertainty Persists

After surging on the back of optimism over a potential Brexit breakthrough the Pound failed to hold onto its multi-month highs last night. As attorney general Geoffrey Cox published his legal opinion on the updated Brexit proposals this failed to galvanise support for the deal among MPs. With Theresa May facing a fresh defeat GBP exchange rates slumped sharply across the board, reversing Monday’s gains.

As long as a sense of uncertainty over the UK’s future relationship with the EU persists this is likely to keep the Pound on the back foot.

Hopes of ECB Optimism Shore up Euro

The Euro struggled to find direction yesterday in the absence of any fresh Eurozone data. Even so, comments from European Central Bank (ECB) sources offered encouragement to the single currency. With officials reportedly keen to reduce banks’ reliance on central bank funds this raised hopes that the central bank could adopt a less dovish outlook in the coming months. The relative weakness of the US Dollar also gave EUR exchange rates a boost.

Any evidence of a slowdown in January’s Eurozone industrial production figures may prompt the Euro to trend lower across the board, however.

Weaker Inflation Weighs Heavily on US Dollar

An unexpected easing in February’s US consumer price index data saw USD exchange rates lose further ground overnight. Investors were not impressed to find that inflationary pressure had eased from 1.6% to 1.5% on the year. With price pressures proving relatively muted the case for any Federal Reserve policy action remains limited, to the detriment of the US Dollar.

If the latest durable goods orders figure contracts as forecast this could see USD exchange rates extend their downtrend further tonight.

Canadian Dollar Struggles to Capitalise on Rising Oil Price

An uptick in oil prices offered limited support for the Canadian Dollar, even though Brent crude continued to trend comfortably above the US$66 per barrel mark. As market risk appetite remained largely muted this kept CAD exchange rates on a weaker footing, even as commodity prices improved. Even so, the Canadian Dollar still benefited from the weakness of its US cousin last night.

Without the support of market risk appetite, though, CAD exchange rates could be vulnerable to a fresh decline.

Positive Truckometer shores up New Zealand Dollar

As February’s ANZ truckometer remained in positive territory this helped the keep NZD exchange rates on an uptrend yesterday. With the domestic economy showing fresh signs of growth the mood towards the New Zealand Dollar improved, even as the truckometer slowed on the month. Solid economic activity could encourage the Reserve Bank of New Zealand (RBNZ) to take a more optimistic view, decreasing the odds of an interest rate cut.

A positive showing from the food price index this morning could encourage the New Zealand Dollar to gain additional ground.

Data Releases

March 13th 08:45    NZD    Food Price Index (MoM) (FEB)    0.6%
March 13th 10:30    AUD    Westpac Consumer Confidence (MAR)    102.5
March 13th 21:00    EUR    Eurozone Industrial Production (YoY) (JAN)    -2.1%
March 13th 23:30    USD    Durable Goods Orders (JAN P)    -0.5%

Post by TorFX

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