The Pound to Euro (GBP/EUR) exchange rate has been offered some support by the prospect of a rate cut by the European Central Bank (ECB) and the prospect of any conciliatory messages regarding Brexit after a new Prime Minister is named.
Meanwhile, Sterling made gains over the Canadian Dollar (GBP/CAD) after the release of some disappointing sales data from Ottawa yesterday.
UK Recession Comments Take Toll on Pound Sterling (GBP) Exchange Rate
The British Pound to US Dollar exchange rate (GBP/USD) came under pressure again yesterday after a report from the National Institute for Economic and Social Research (NIESR) suggested that the overhanging threat of a no-deal Brexit may have already pushed the UK into recession. The Brexit story will, however, take another step forward today when the Conservative Party announces the results of its leadership election. Although hard-line Brexit supporter Boris Johnson is expected to take the helm, politicians have made no secret of their desire to avoid a no-deal departure. A collegiate tone could help support Sterling, while anything that could trigger a quick general election would mean further uncertainty and likely losses for the Pound.
Hopes of ECB Rate Cut Lend Support to Pound vs Euro (GBP/EUR)
The Pound to Euro exchange rate (GBP/EUR) is holding comfortably above last week’s lows in anticipation of policy easing news being seen from the European Central Bank later this week. With limited economic data due for release before this statement, political affairs are likely to remain in focus. The market may respond positively to any suggestion from the incoming Prime Minister that a more conciliatory route ahead can be found with regard to Brexit. One low-level data print which may attract some attention is today’s Business Optimism reading from the CBI. The figure is set to be dragged lower by a combination of a slowing global economy and the more focussed effects of Brexit, but anything much worse than expectations could reinforce the recession risk and see further Pound selling as a result.
Why Did it Move? Pound to Canadian Dollar (GBP/CAD) Exchange Rate
The British Pound gained ground over the Canadian Dollar yesterday after the release of some disappointing Canadian Wholesale Trade data. The number is seen as increasing the likelihood of the Bank of Canada (BoC) needing to cut interest rates, with the move coming despite the recent gains in oil prices, something which is usually supportive of CAD. From lows around 1.6260 yesterday, the cross traded as high at 1.6380 overnight.