PM rumours leave pound exchange rates weaker

After enjoying a bit of respite on Wednesday, pound exchange rates went right back on their downtrend as the end of the week drew near.

GBP/EUR slid below €1.1200 (hitting a low of €1.1163) while GBP/USD fell back to $1.3073, GBP/AUD edged to AU$1.6839, GBP/NZD brushed lows of NZ$1.8397 and GBP/CAD slid to C$1.6444.

What currency movement can we expect before the weekend? Read on to find out…

What’s been happening?

Tumbling UK car sales and dark political rumblings sent the pound lower against the majors on Thursday.

Although car sales typically rise in September with people taking advantage of new licence plates, new car registrations unexpectedly slumped by -9.3%.

As car sales are a fairly good reflection of consumer sentiment, this additional sign of weakness in the UK economy kept Bank of England (BoE) rate hike expectations depressed and left Sterling struggling.

The situation wasn’t helped by credit ratings agency Standard & Poor’s asserting that the UK economy isn’t strong enough to warrant a rate hike. S&P also insinuated that the BoE is talking up the prospect of a rate hike in order to bolster the pound.

Further GBP pressure came from the political sphere amid rumours that PM Theresa May could face a leadership challenge in the near future.

Meanwhile, the euro fluctuated in response to the minutes from the last European Central Bank (ECB) policy meeting. Although the minutes displayed confidence in the Eurozone’s economic outlook, they weren’t as gung-ho on the prospect of tightening monetary policy as some had hoped.

The US dollar found support from several over-performing US data releases, with positive trade, durable goods orders and factory orders reports keeping hopes for a third Fed rate hike in 2017 very much alive.

What's coming up?

The GBP/EUR exchange rate consolidated losses this morning as German factory orders surged in August. The 3.6% month-on-month result and 7.8% year-on-year figure smashed forecasts of 0.7% and 4.7%.

Both the GBP/CAD and GBP/USD exchange rates are likely to experience volatility later today, with Canada and the US set to publish influential employment data.

The US figures will be particularly influential. Non-farm payrolls are expected to come in at a lowly 80k in light of the hurricanes that ravaged the US in September. Any figure higher than this would be US dollar-supportive.

Wage growth is also key, as a pickup in earnings would bolster the argument in favour of higher borrowing costs.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.