The Pound Sterling exchange rate rallied on Thursday against the Euro (GBP/EUR) and Australian Dollar (GBP/AUD) as markets watched Brexit divorce deal developments unfold. It seems as if Theresa May could be placing an offer on the table that might see talks move onto trade, something markets are keen to see in order to begin providing the UK with some stability. The chances of a disorderly Brexit in 2019 will be lessened if negotiators can begin discussing trade and may offer businesses some indication of how Britain’s departure from the EU might impact them.
However, some city analysts have suggested that the Pound’s gains may soon come undone. Industry expert Jordan Hiscott commented:
‘The negotiations are yet to be officially agreed, and I suspect many hard Brexit advocates from the Conservative party will baulk at the idea of paying the €60bn, with the possibility of further remunerations at a later stage, rumoured to be £80bn-£90bn.’
However, the British Pound remains well below pre-referendum levels. Just a month before the Brexit vote the GBP/EUR exchange rate was trading at levels of 1.31, today it’s residing at around 1.13.
Meanwhile, in the Eurozone, unemployment dropped to a near nine-year low at 8.8% in October. However, inflation numbers were also simultaneously released which showed consumer prices had missed the forecast. The November number reached 1.5% up from 1.4%, but failed to hit the 1.6% economists had forecast. Core inflation remained at 0.9% the same as October.
Economist Frederik Ducrozet commented:
‘The euro area core HICP number should indeed raise concerns about the slow responsiveness of consumer prices to stronger growth, but I suspect that the ECB will continue to expect lower unemployment to result in higher wage growth and inflation in 2018.’
Down Under also had some ecostats hit the market today; Australian Private Sector Credit came in at 5.3% in October on the year, down from the previous month’s 5.4%. Meanwhile, Building Permits rose by 0.9% in October after September’s 0.6%, and despite forecasts to contract. The GBP/AUD exchange rate has recently hit 14-month highs as the Aussie Dollar remains under pressure. The AUD exchange rate has been offset by US Dollar strength which has occurred on strong economic growth and hawkish comments from the US Federal Reserve, as well as higher US bond rates.
The Pound to Euro (GBP/EUR) exchange rate is trading at 1.1358. The Pound to Australian Dollar (GBP/AUD) exchange rate is trending in the region of 1.7769.