Pound Slumps as Hopes for Third Meaningful Vote Fade

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  • AUD Exchange Rates Direction Limited in Anticipation of RBA Minutes – Signs of policymaker dovishness to weigh on Australian Dollar
  • Lack of Clarity Over Brexit Keeps Pound Under Pressure – Theresa May struggles to shore up support for rejected Brexit deal
  • Euro Falters as Eurozone Trade Surplus Narrows Sharply – Single currency vulnerable to negative economic sentiment surveys
  • Disappointing Housing Market Index Dents US Dollar – USD support limited ahead of Federal Reserve policy announcement

Australian Dollar Muted Ahead of RBA Minutes

The Australian Dollar struggled to find a direction yesterday in the absence of any fresh domestic data. As markets expect no action from the Federal Reserve this week the downside pressure on AUD exchange rates was limited, thanks to the softer US Dollar. However, as expectations mounted ahead of the release of the Reserve Bank of Australia’s (RBA) latest meeting minutes the appeal of the Australian Dollar still proved generally muted.

If the minutes show signs of increased dovishness among policymakers this could weigh heavily on AUD exchange rates this morning.

Brexit Uncertainty Drives Pound Lower

A fresh contraction in the Rightmove house price index put the Pound under pressure last night, with signs continuing to point towards a slowdown within the UK housing market. Brexit developments also helped to drive GBP exchange rates lower over the course of the day. Investors continued to lack a sense of clarity over the UK’s future relationship with the EU, especially as support for Theresa May’s proposed deal remained limited.

Confidence in the Pound could diminish further this evening if average weekly earnings show signs of slowing.

Narrowed Eurozone Trade Surplus Weighs on Euro

As January’s Eurozone trade balance weakened, with the surplus narrowing from 17 billion to just 1.5 billion, this limited the appeal of the Euro. This deterioration offered fresh evidence of the negative impact that global trade tensions are having on the Eurozone economy, with trade looking set to remain muted for some time to come. Even so, the softening of the US Dollar helped to reduce the data’s negative impact on EUR exchange rates.

Another negative reading from the ZEW economic sentiment surveys may encourage investors to pile out of the Euro tonight.

US Dollar Trends Lower After Housing Index Miss

Disappointingly, March’s NAHB housing market index failed to pick up on the month as forecast. As the index held steady on the month the appeal of the US Dollar diminished, with markets seeing increasing signs of the world’s largest economy losing its momentum. With the odds of the Federal Reserve raising interest rates again in 2019 continuing to weaken USD exchange rates remained on the back foot.

An uptick in tonight’s factory orders figure could encourage the US Dollar to recover some of its lost ground, however.

Canadian Dollar Unable to Capitalise on Oil Price Uptrend

While oil prices trended higher once again at the start of the week this was not enough to shore up the commodity-correlated Canadian Dollar. In the wake of last week’s underwhelming Canadian data investors have taken an increasingly bearish view, leaving CAD exchange rates exposed to weakness. With confidence in the domestic economy muted and the Bank of Canada (BOC) taking an increasingly dovish outlook the appetite for the Canadian Dollar was limited.

As long as worries over the economic outlook remain CAD exchange rates may struggle to find any particular rallying point.

Service Sector Weakness Fails to Prevent New Zealand Dollar Gains

February’s New Zealand services PMI proved disappointing, with the index easing from 56.2 to 53.8 on the month. With the service sector showing signs of losing its earlier momentum the prospect of stronger economic growth diminished. Even so, with the US Dollar on the back foot the higher-yielding New Zealand Dollar was able to trend higher yesterday.

If the first quarter Westpac consumer confidence index falls short of forecast, though, NZD exchange rates are likely to falter.

Data Releases

March 19th 07:00    NZD    Westpac Consumer Confidence Index (1Q)    
March 19th 11:30    AUD    Reserve Bank of Australia Meeting Minutes (MAR)    
March 19th 20:30    GBP    Average Weekly Earnings (3M/YoY) (JAN)    3.2%
March 19th 21:00    EUR    German ZEW Economic Expectations Survey (MAR)    -11
March 20th 01:00    USD    Factory Orders (JAN)    0.3%

Post by TorFX

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