The British Pound exchange rate had a difficult start to the week after a UK government minister poured cold water on the idea that a post-Brexit trade deal with the USA would be quickly implemented. Not only did this leave the Sterling – US Dollar (GBP/USD) exchange rate under pressure, but it also took a toll on the British Pound – Euro (GBP/EUR) exchange rate. Downside here could, however, be short-lived if forward-looking economic indicators for the Eurozone fail to impress. Further afield, the Pound lost ground to the Kiwi Dollar (GBP/NZD) after better-than-expected Chinese economic data served to buoy the outlook for the broader New Zealand economy.
Sterling Stutters Amid Post-Brexit Trade Worries
Despite it having been a quiet start to the week in terms of fundamental data, politics served to take a toll on the British Pound – US Dollar exchange rate (GBP/USD) after UK Trade Secretary Liam Fox suggested that any post-Brexit transatlantic trade deal may well prove harder to implement than is currently being suggested. The news was sufficient to see Cable (GBP/USD) decline by around three-quarters of a cent, driving the pair back to levels not seen since Federal Reserve Chief Jerome Powell provided fresh indications over the likelihood of US interest rate cuts in his testimony to politicians last week.
Eurozone Economic Sentiment Could Rock Common Currency
Concerns over future UK trade relationships also rocked the Pound – Euro exchange rate (GBP/EUR) yesterday, although this latest bout of downside could yet prove short-lived. The forward-looking ZEW surveys for German and broader Eurozone economic sentiment are due to be released this morning, with both figures expected to post a month-on-month decline. Anything that comes in even lower than the forecast prints has the potential to initiate a degree of Euro weakness, although it’s worth reiterating how depressed the GBP/EUR rate is right now, sitting just a quarter of a cent above its six-month lows.
Looking beyond the economic data, the Euro (EUR) exchange rate could find fresh support later this evening if Ursula von der Leyen is confirmed as the next President of the European Commission. Given the lack of alternatives on offer, this looks likely, but anything that removes uncertainty would have the ability to lend support to the common currency.
Why Did it Move? Pound to New Zealand Dollar (GBP/NZD)
The Kiwi Dollar has been buoyed this week by the release of better-than-expected Chinese economic data. Gross Domestic Product (GDP) readings from Beijing may have been in line with expectations, but other metrics including Retail Sales and Industrial Production both impressed. A quarter of all New Zealand exports go to China, making it the country’s most significant trade partner. This, combined with yesterday’s Sterling weakness, has seen the British Pound – New Zealand Dollar exchange rate (GBP/NZD) slide from 1.8790 on Sunday night to 1.8580 in current trade.