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GBP/EUR collapses to six-week low as government’s trade mandate puts the UK on path towards a no-deal Brexit

currency-newsGBP/EUR collapses to six-week low as government’s trade mandate puts the UK on path towards a no-deal Brexit
The pound moved sharply lower yesterday as markets were spooked by the publication of the UK’s mandate for trade negotiations with the EU.

Sterling looks to be finding its feet again this morning however, as GBP/EUR stabilises at €1.1697, and GBP/USD holds steady at $1.2874. GBP/CAD has accelerated to C$1.7313, while GBP/AUD and GBP/NZD have surged to AU$1.9715 and NZ$2.0612 respectively.

Coming up, the euro may be in focus today, with a robust inflation reading from Germany potentially propelling the single currency higher this afternoon.

What’s been happening?           

The pound fell victimto a sharp selloff on Thursday after the UK outlined its aims for trade talks with the EU next month.

This saw the UK government call for a ‘‘comprehensive free trade agreement’ but also reiterate that any alignment with EU regulations would be a deal breaker.

But most alarming to GBP investors was the UK government’s warning that it may walk away from trade talks in June if enough progress is not made, something which traders fear puts the UK on a path towards a no-deal Brexit.

The US dollar also tumbled yesterday, with a slump in US treasury yields and rising speculation that the coronavirus will prompt a rate cut from the Federal Reserve weighing heavily on USD exchange rates.

Meanwhile, the euro roared into life yesterday, soaring on the back of stronger-than-expected Eurozone economic sentiment and growing hopes of some fiscal stimulus in Germany.

What’s coming up?

Looking ahead, while coronavirus headlines are likely to preoccupy many investors through the end of this week’s session, there will also be a few economic releases which may also influence markets today.

For EUR investors the focus will be on Germany’s consumer price index, where a robust inflation reading in February could help the euro extend its recent gains.

In the US the publication of the Fed’s favoured indicator of inflation, the PCE price index, may drag on the US dollar on the expectation for a modest slowing of inflation last month.

Finally, a speech by the Bank of England’s (BoE) Andy Haldane could send the pound lower this morning if the policymaker indicates he would support an immediate cut to interest rates.
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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