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Will political uncertainty keep pound under pressure?

business-articlesWill political uncertainty keep pound under pressure?
  • Pound slides as political uncertainty reigns

  • Weaker economic sentiment could dent euro

  • US dollar benefits from market risk aversion

 
 

Can pound shake off political pressure today?

 
Political uncertainty looks set to keep the pound under pressure today, with markets unsettled by Theresa May’s decision to postpone the parliamentary vote on Brexit.
 
While this averts a heavy government defeat, at least for the time being, political jitters are gripping markets once again.
 
GBP exchange rates may still find some support this morning, though, if the latest UK average weekly earnings data prints positively.
 
As long as UK wage growth shows signs of picking up this should limit the losses of the pound in the near term.
 
 

Euro vulnerable to fresh deterioration in German economic sentiment

 
While the German ZEW economic sentiment index is unlikely to climb out of negative territory this morning the euro could still rally in the wake of the data.
 
Any improvement from November’s disappointing reading of -24.1 could give investors incentive to buy into the single currency.
 
However, if the index falls further into the negative EUR exchange rates are likely to slide in response.
 
Unless signs point towards a greater sense of confidence within the Eurozone’s powerhouse economy the euro may struggle to return to a stronger footing today.
 
 

US dollar gains ground ahead of business optimism index

 
The US dollar has benefitted from the more risk averse mood of markets, with investors seeking out safe-haven assets thanks to Brexit uncertainty and global trade tensions.
 
Demand for the US dollar could weaken this morning, however, if November’s NFIB small business optimism index fails to show an improvement on the month.
 
Markets have shown increasing signs of concern over the outlook of the US economy in recent weeks, with the Trump administration’s protectionism showing signs of constraining growth.
 
With the Federal Reserve looking set to take a less aggressive approach to monetary policy in 2019 any weak data could easily drag USD exchange rates down.
 
 

Upcoming Data:

 
Tuesday, 11th December 2018
09:30 GBP Average Weekly Earnings
10:00 EUR German ZEW Economic Sentiment Index
11:00 USD NFIB Small Business Optimism Index
23:30 AUD Westpac Consumer Confidence Index

Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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