The Pound experienced a terrible day for trading on Monday when Theresa May and Brexit politics saw Sterling sink by around -1.60%. The Pound to US Dollar (GBP/USD) exchange rate hit 20-month lows as it tumbled to levels of 1.25. The Pound to Euro (GBP/EUR) exchange rate reached three-month lows too.
Theresa May Halts Brexit Vote, Pound Exchange Rate (GBP/EUR, GBP/USD) Sinks
Theresa May announced that the planned vote on her Brexit agreement scheduled for today, 11th December, wouldn’t go ahead as it would be defeated when put to MPs. Instead, the British Prime Minister decided to withdraw the vote to enable her more time to go back to the European Union and ask for reassurances over the Irish backstop issue. There was plenty of chaos in Parliament as MPs debated the event, and the Pound exchange rate began falling on the uncertainty.
Today, the UK will release its latest employment and wage data which could offer Sterling some support should the ecostats suggest inflationary pressures are present. However, recent economic data has been somewhat lacklustre, and therefore today’s figures could bring further disappointment to the market.
Update: The UK’s Claimant Count Rate increased from 2.7% to 2.8% in November, while Average Weekly Earnings surged higher in the three months through October on the year, coming in at a positively revised 3.1% in the previous reading, to 3.3.% in today’s print. Excluding bonuses, the figure also reached 3.3%. The UK Employment Change number surged to 79K in the same time period, far more positive than the 25K forecast or the previous 23K reading. Today’s wage growth reading marks a 10-year high, the best levels since the Global Financial Crisis, and could be somewhat comforting to UK households as Brexit politics languish in turmoil with the 29th March fast approaching. For reference, inflation sat at 2.2% in October.
While Theresa May suggests she’ll be going back to Brussels to renegotiate, Jean-Claude Juncker’s speech to the European Parliament suggested that while there would be room for clarification, there would be no room for renegotiation.
I will meet @theresa_may this evening in Brussels. I remain convinced that the #Brexit deal we have is the best – and only – deal possible. There is no room for renegotiation, but further clarifications are possible.
— Jean-Claude Juncker (@JunckerEU) December 11, 2018
Germany will release its latest ZEW surveys today which could be moderately influential for the Euro exchange rate. The Euro also suffered during yesterday’s trading, coming in around a cent lower against the US Dollar (EUR/USD) from highs seen earlier in the morning.
Markets will also be viewing US data in the form of the latest Producer Price Inflation readings. Investors are looking for signs that the Federal Reserve might not hike interest rates this month, and any softer data that supports that dovish stance could give the US Dollar exchange rates room to weaken. There are also political risks on the horizon across the pond, with potential impeachment proceedings ahead.
Reserve Bank of India (RBI) Chief Resigns Pressuring Rupee Exchange Rate (INR/USD) Lower
Meanwhile, the Indian Rupee (INR) has taken a hit of its own after the Reserve Bank of India’s (RBI) Chief resigned in a shock move. The Indian currency slipped by around 1.2% against the US Dollar (INR/USD) as Urjit Patel resigned for ‘personal reasons’, only half-way through his supposed three-year term. His resignation has been viewed as a negative development for the market and many are questioning if the matter is more to do with the central bank’s independence.
Industry expert Priyanka Kishore said:
‘Patel’s resignation seems like a protest to the government’s interference. There are already other concerns weighing on the economy… Uncertainty about RBI’s leadership and policy at this point could weigh on growth further.’
Today’s Interbank Exchange Rates (GBP/EUR, GBP/USD, GBP/INR)
The Pound to Indian Rupee (GBP/INR) exchange rate is trading at 90.1890. The Pound to Euro (GBP/EUR) exchange rate is trading at 1.1081. The Pound to US Dollar (GBP/USD) exchange rate is trending in the region of 1.2610. In the near-future, Brexit developments and uncertainity could keep pressure on the Pound Sterling (GBP) exchange rate.