Political risk continues to dominate the agenda for Sterling, with a headstrong commitment to delivering Brexit presenting a raft of uncertainty and leaving the Pound to struggle against major currencies including the US Dollar (GBP/USD) and Euro (GBP/EUR). Mark Carney is in front of MPs this morning to discuss the inflation report, although his pessimistic views over Brexit may well end up being the key takeaway for markets here. Also, the New Zealand Dollar has posted some meaningful gains over the British Pound (GBP/NZD) after the Reserve Bank of New Zealand (RBNZ) failed to deliver a rate cut overnight.
Boris’ Brexit Rhetoric Keeps Pound Exchange Rate on Back Foot
The British Pound exchange rate remains under pressure as Boris Johnson’s rhetoric over delivering Brexit on October 31st continues to strengthen. While this may be impossible to push through parliament, it does heighten the risk of seeing rifts within the Conservative Party deepen, and could ultimately trigger a general election as a result. Markets won’t appreciate the uncertainty that such an event would bring and the news has seen the Pound US Dollar exchange rate (GBP/USD) slump to fresh lows on the week as a result. With another four weeks of uncertainty before Theresa May is set to resign, this story isn’t going anywhere quickly.
Bank of England (BoE) Governor Mark Carney to be Quizzed By MPs – Pound Tentative
Bank of England policymakers including Governor Mark Carney will attend the House of Commons Treasury Select Committee this morning to answer questions regarding the latest inflation report. Although the BoE slashed growth forecasts for the UK last week, inflationary pressures remain a risk and if a no-deal Brexit can be avoided then interest rate rises will be increasingly likely. Further clarity over an interest rate hike could help the Pound-Euro exchange rate (GBP/EUR) find some support as it heads towards fresh five-month lows, but with Mark Carney unlikely to be changing his bearish tone over the significant economic risk of a no-deal Brexit, Sterling may struggle to see any lasting positives.
Why Did it Move? Pound to New Zealand Dollar (GBP/NZD) Exchange Rate
The Reserve Bank of New Zealand released its latest monetary policy statement in the early hours of this morning. Speculation ahead of the event that a rate cut may be seen allowed the Pound to strengthen against the Kiwi Dollar (GBP/NZD) ahead of the announcement. Even though there was a dovish bias, headline rates were left unchanged and this was sufficient to allow the Kiwi to reverse losses. Having been as high as 1.9140 before the event, GBP/NZD now trades at 1.9025