The pound has faced another difficult week so far after a huge amount of political uncertainty. Late last night it was announced that MPs have managed to block a no deal Brexit from happening.

They succeeded with 328 to 301 votes to suspend a rule that means only the government can create new laws. This has led to the pound finding some support overnight.

However, owing to the defeat Boris Johnson has signalled that he may try and trigger a general election. This would need the support of two-thirds of MPs for this to happen. Therefore, we could see further movement on the currency markets later today.

Indeed, according to ING strategist Petr Krpata the threat of a no deal Brexit and early election is still ‘underpriced by the market’ this comment suggests that the pound could fall further.

Pound to US Dollar rate hits 3 year lows

Pound to US Dollar rate hits 3 year lows

The pound vs the US dollar has hit its lowest level since October 2016 after the political uncertainty caused the pound to fall during yesterday’s trading session. The US dollar has been going from strength to strength recently against a number of currencies including vs the euro and the pound. Prior to the original Brexit vote the GBP/USD rate was trading at around 1.50 so we have seen a drop of approximately 20% since June 2016.

Yesterday the dollar weakened following a disappointing manufacturing data release. This could mean that Friday’s jobs data could be more negative than first thought. The US will release its latest set of unemployment data on Friday.

US Non-Farm Payroll data will also be released, and the expectation is for 159,000 new jobs created so anything different could result in volatility on GBP/USD rates to end the week.

The unemployment rate is also expected to hit 3.7% so anything different could cause the Federal Reserve to look at monetary policy at their next meeting especially is we see a rise in the data. Trump has been calling for a rate cut for some time so pay close attention to the unemployment figures on Friday afternoon.

ECB restarts QE, its unconventional easing scheme

Could the ECB be looking to cut interest rates further?

According to reports by Reuters out yesterday the European Central Bank (ECB) may be gearing up to cutting interest rates as well as further Quantitative Easing. The next meeting is due to take place on 12th September in Frankfurt so if you have an euro requirement coming up, keep an eye out for the decision.

Eurozone Retail Sales data is published at 10am this morning. Expectation is for a fall to 2% year on year from 2.6% so this could put pressure on the single currency as it could influence the ECB to consider changing monetary policy later this month.

On Friday morning the Eurozone will announce its latest set of GDP data for the second quarter. The expectation is for 1.1% for the year on year and 0.2% for quarter on quarter. This will make interesting reading especially after Germany recently announced that their economy had contracted during the second quarter.

 

Canadian import & export data released today

The Canadian dollar has strengthened against the pound this week mainly caused by what is happening in the UK rather than specifically in Canada. However, we could see a lot of movement for GBP/CAD exchange rates later today.

We begin with Import & Export data for the month of July and this will be closely followed by the Bank of Canada’s (BoC) interest rate decision and press conference later. The expectation is for the BoC to keep rates on hold at 1.75%.

The last time the central bank moved policy was to raise rates back in October 2018, so I don’t expect to see any change later on today. However, the press conference could provide clues as to what they may do in the future.

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