The Pound began Tuesday’s European trading higher against the Euro (GBP/EUR) and Swiss Franc (GBP/CHF) exchange rates, but began to retrace some of its gains following the release of UK inflation data.
As forecast by economists, UK inflation eased from 3.1% to 3.0% in December, relieving the Bank of England (BoE) from pressure to consider increasing interest rates in the immediate future.
The Office for National Statistics (ONS) said:
‘The largest downward contribution came from transport, particularly air fares and to a lesser extent coach and rail fares. As is usually the case in December, air fares rose sharply, with the increase being of a similar magnitude to the previous year. However, because air fares account for a smaller proportion of the basket of goods and services in 2017, the impact of the rise in prices on the contribution of air fares to the headline rate was smaller in 2017 than in 2016. This in turn resulted in air fares making a downward contribution to the change in the rate. These downward contributions were partially offset by prices for motor fuel, which increased between November and December 2017, having fallen a year ago.’
Additionally, Brexit is rearing its head again as speculation regarding a second EU referendum sweeps the market. Former UKIP leader and pro-Leave campaigner Nigel Farage called for a second vote after he stated that the Leave camp had stopped pushing for Brexit.
‘The Remain side are making all the running. They have a majority in parliament, and unless we get ourselves organised we could lose the historic victory that was Brexit.’
Farage said that the second referendum might be necessary to put a clear end to the argument once and for all, stating that he believed pro-Leave voters could increase from the number that voted in the June 23rd 2016 vote.
Furthermore, a new BMG poll has shown that should Theresa May not secure a deal with EU negotiators, that 57% of people would want another Brexit vote, while 73% of younger voters in the 18-34 age range would strongly support another referendum.
A separate poll orchestrated by Comres has found that voters would back Remain this time around with around 55% voting to stay and only 45% voting to leave. These stats and rumours for a second referendum are likely to place pressure on Prime Minister Theresa May to secure some kind of agreement or face another referendum and a possible leadership battle.
Meanwhile, in Switzerland, Swiss National Bank (SNB) Chief Thomas Jordan is due to speak today in Zurich, which could influence the way the safe-haven Franc trades.
There’s very little data from the Eurozone due out today; however, the final reading of the German Consumer Price Index came in at 1.7% in December on the year as economists had expected.
The GBP/CHF exchange rate is trending in the region of 1.3290.
The GBP/EUR exchange rate is trading at 1.1260.