The Pound exchange rates (GBP/EUR, GBP/USD) were able to reach 10-week highs in Wednesday’s session as Brexit optimism grew. The Pound to US Dollar (GBP/USD) exchange rate achieved its biggest one day gain in over two months as investors supported Sterling. Meanwhile, the Pound to Euro (GBP/EUR) exchange rate has registered gains for nine out of 10 of the last consecutive days.
With only 64 days to go until Brexit day, markets are hoping an extension of Article 50 will take place, but voting in parliament next week should be an interesting event which could give the UK some direction as to what happens next.
Although Sterling sentiment is buoyant right now, should the possibility of another general election, or threats of a no-deal exit emerge, the British currency could tumble. The Euro hasn’t been helped by speculation that the European Central Bank (ECB) may need to take a dovish tone after a slew of less-than-inspiring ecostats made their way onto the market, just when the central bank was wrapping up its stimulus. Investors will be looking for any signs from ECB President Mario Draghi on when or if an interest rate hike is likely to happen this year. Today, Euro movement is likely off the back of the ECB’s interest rate decision and follow-up press conference with Mario Draghi.
EUR/USD, EUR/GBP Exchange Rates Under Pressure
The Euro is also being pressured by news that a no-deal Brexit will have a detrimental impact on the currency bloc, as well as a downgrade in growth forecasts from the International Monetary Fund (IMF).
Eurozone data this morning has yielded some unfavourable results too. Germany’s Manufacturing Purchasing Managers’ Index (PMI) slipped into contraction territory in January, at 49.9. The ecostat stumbled from 51.5, bypassing the 51.4 forecast. However, the German Services PMI rose from 51.8 to 53.1 in the same time period, while the Composite measure climbed from 51.6 to 52.1. Investors will be interested to see the same data for the Eurozone, released later this morning.
US Markit Data Ahead – US Dollar Exchange Rate Climbing
Meanwhile, in the US, markets will be looking towards today’s Markit Manufacturing, Services, and Composite Purchasing Managers’ Indexes. Forecasts suggest a small decline will take place in the Services and Manufacturing measures, which could put some pressure on the US Dollar. The USD/GBP and USD/EUR exchange rates have started the day on the front foot, but any deterioration in political tensions both domestically and with China could impact the USD exchange rate.
The GBP/EUR exchange rate is trading at 1.1488. The GBP/USD exchange rate is trading at 1.3061.