• The Pound remains under political pressure

  • Australian Dollar shows slight improvement as GDP data meets expectations

  • Strong improvement on Canadian economy

The rising political turmoil in Europe has had influence on major currencies world-wide. Despite the tensions caused by the trade war waging on between US and China, the US Dollar remains strong and a safe haven currency.
Earlier this week, GBP/USD had tumbled to 1.20 on election speculation, which represented its lowest level since October 2016. However, the Pound recovered as rebel MPs took majority to block the UK from crashing out of Europe on October 31st. That said, Sterling still remains under political pressure which can influence its rate against major currencies.
In terms of data, UK PMI came out worse than expected at 50.6, down from 51.4 in July. This will mainly affect GBP/EUR. Positive figures for Australian Dollar despite weak consumer spending. Strong improvement for the Canadian Dollar as BOC Governor said the economy had outperformed in recent months.

 

USD remains strong

The USD remains strong as a safe haven currency against the turmoil surrounding Brexit and the US-China Trade tensions. Until either situation is resolved the Dollar should continue to do well.
The Pound has bounced from the early week lows below 1.20 as Parliament voted to try and block no-deal and against Boris Johnson. However, Sterling’s recovery is currently very limited as the possibility of a General Election and a no-deal still remain. Upside, until we have a clear ‘Eureka’ moment on Brexit, it looks likely to be the August high of 1.2300.
EUR/USD hit its almost 2 year low earlier in the week but has subsequently bounced on some mixed data from the US Manufacturing Sector in August. The Euro’s position remains vulnerable with poor data coming out from Germany adding to the general uncertainty around Brexit which has seen the EUR come down to 1.10 versus the Dollar.

 

Negative UK PMI data affects GBP/EUR

GBP/EUR had fallen to 1.0903 over the last 24 hrs but has since recovered to trade around 1.1080 – only testing this level twice since July.  The main reason for the relief in Sterling resides in Parliament’s win over Boris Johnson. MPs wrested control of parliamentary business away from the government in a vote that saw 21 Conservative MPs rebel.  Pound’s strength is largely due to markets interpreting recent developments as a sign the UK is drifting away from a no-deal Brexit, believing remainders in Parliament will force through a Brexit extension.  Although a momentary uplift, the general sentiment remains the same with Sterling still under severe political pressure.  Data wise, UK Services PMI, which accounts for 80% of the UK economy, came out worse than forecast with 50.6 and down from July’s 51.4.  Although the figure avoids a contraction (anything below 50), concerns of a recession look slightly more likely.  This will only hamper GBP/EUR going forward.  Looking ahead the key focus will once again be Brexit related and how the events unfold in Parliament. 

 

Australian Dollar shows slight improvement as GDP data meets expectations

The Australian Dollar was riding high against most of its G10 counterparts during the morning session on Wednesday after official data appeared to show the economy recovering its poise in the second quarter, although some analysts say there is trouble ahead and that nascent gains won't last long for the Aussie.
AUD advances after GDP growth meets expectations for second-quarter. But economy only saved from contraction by Government spending and exports. Consumer spending is weak amid serious trade war threats to AU exports. More RBA interest rate cuts and weak AUD key to economic outlook. AUD tipped to lose steam on rising threat to domestic and global growth.

 

Strong improvement on Canadian economy

The Bank of Canada (BOC) has moved into wait and see mode, focusing on how China/US trade war impacts the economy before deciding on whether to cut interest rates. Along with the Pound, Canadian Dollar is the strongest performer today. They elected to keep rates on hold yesterday as BOC Governor Stephen Poloz said the economy had outperformed in recent months. He does expect a slowdown in the second half of the year but for the moment Canada and US have the highest interest rates amongst the G10. With yesterday’s 3rd defeat for UK PM Boris Johnson, the Pound has seen aggressive buying and that may will continue, particularly if a snap election before October 31st is avoided. Over the last three days, GBP/CAD has rallied 3 cents and looks like it is targeting 1.6320 and on a break there, onto 1.6430. If Boris Johnson’s re-vote on Monday for a pre October 31st snap election is defeated I would expect further upside for GBP.

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD extends recovery beyond 1.1050 on Saudi output headlines

News indicating that Saudi Arabia’s oil output would return to normal quicker than expected, lifted the market’s mood and weighed on the greenback. EUR/USD underpinned by improved Business Sentiment according to the German ZEW Survey.

EUR/USD News

GBP/USD rallies past 1.2500, reaches fresh multi-week highs

The GBP/USD pair is trading above the 1.2500 figure, getting a boost from easing demand for the greenback following relief news related to the crude oil market after the weekend attack to Saudi facilities.

GBP/USD News

USD/JPY drops back to recent range after hitting fresh 6-week highs

The USD/JPY pair spiked to 108.35, reaching the highest intraday level since August 1st and then pulled back to the 108.15/20 area.

USD/JPY News

Saudi Arabia's oil output to be fully back online in next 2-3 weeks

Citing two sources briefed on the Saudi oil operations, Reuters reported that Saudi Arabia's oil output would return to normal levels quicker than initially thought.

Read more

Gold struggles to find direction, trades in tight range near critical $1,500 handle

The XAU/USD pair struggling to make a decisive move on Tuesday and continues to trade in a relatively tight range around the $1,500 handle.

Gold News

Forex Majors

Cryptocurrencies

Signatures