Global Themes

  • Big FX swings shake up Sterling
  • Split Congress knocks dollar
  • Euro pressured by political upheaval
  • Oil prices tumble

GBP

Big FX swings shake up Sterling

It was a volatile trading session for Sterling yesterday as GBP/USD spiked to new 2½-week highs just above $1.31 and GBP/EUR stretched towards 5-month highs of €1.1475. The sensitive British Pound has been seesawing up and down against a basket of currencies on conflicting Brexit headlines. Sterling’s recent positive climb faced headwinds yesterday morning after a Democratic Unionist Party lawmaker cautioned that a no-deal Brexit was likely, which sent GBP/USD slipping 40 pips against the dollar. Then, after UK Prime Minister Theresa May’s Cabinet meeting later on, hopes of a Brexit breakthrough sent the pound scrambling higher against its currency peers. Ms May confirmed what we know already, that 95% of the Brexit deal is done, but the 5% that is unresolved is the Irish border issue. Despite this potentially being an irresolvable problem and everlasting stand-off, Sterling’s uptrend resumed.
Net short Sterling positions (betting on the value of GBP depreciating) have shrunk from September’s two year highs, which has also supported Sterling’s upward momentum. It seems market participants are increasingly hopeful of a Brexit deal being reached, fuelling GBP/USD to rally over 3% over the past seven days.

  •  Is GBP/USD running out of steam as it inches towards the next hurdle of $1.32? With the currency pair surging over 400 pips the last week and a half, it may lose momentum as the $1.32 ceiling approaches. GBP/EUR has surged 300 pips in six trading days but again could face resistance around the key psychological level of €1.15.



USD

Big FX swings shake up Sterling

It was a volatile trading session for Sterling yesterday as GBP/USD spiked to new 2½-week highs just above $1.31 and GBP/EUR stretched towards 5-month highs of €1.1475. The sensitive British Pound has been seesawing up and down against a basket of currencies on conflicting Brexit headlines. Sterling’s recent positive climb faced headwinds yesterday morning after a Democratic Unionist Party lawmaker cautioned that a no-deal Brexit was likely, which sent GBP/USD slipping 40 pips against the dollar. Then, after UK Prime Minister Theresa May’s Cabinet meeting later on, hopes of a Brexit breakthrough sent the pound scrambling higher against its currency peers. Ms May confirmed what we know already, that 95% of the Brexit deal is done, but the 5% that is unresolved is the Irish border issue. Despite this potentially being an irresolvable problem and everlasting stand-off, Sterling’s uptrend resumed.
Net short Sterling positions (betting on the value of GBP depreciating) have shrunk from September’s two year highs, which has also supported Sterling’s upward momentum. It seems market participants are increasingly hopeful of a Brexit deal being reached, fuelling GBP/USD to rally over 3% over the past seven days.

  •  Is GBP/USD running out of steam as it inches towards the next hurdle of $1.32? With the currency pair surging over 400 pips the last week and a half, it may lose momentum as the $1.32 ceiling approaches. GBP/EUR has surged 300 pips in six trading days but again could face resistance around the key psychological level of €1.15.



EUR

Euro pressured by political upheaval

The ongoing political tensions in Europe have left the Euro weaker over the past six months. The most recent Italian budget turmoil has left Brussels and Rome in dispute as Italy’s populist government were accused of breaking the rules of the common currency blo, with its new budget proposals. If the European Commission decides to fine Italy, the conflict with Rome could escalate, which does not bode well ahead of the European elections in May 2019. The European Union will likely fear that this could boost anti-EU parties and disrupt the whole system, which could heavily weaken the Euro.

  •  Today, retail sales data for September will be released at 10:00am. A drop to 0.7% from 1.8% y/y is expected, which could scupper the Euro’s recent recovery against the US Dollar and could also be the catalyst to drive GBP/EUR above the €1.15 mark.




commodities

Oil prices tumble

Oil prices continue to fall after President Donald Trump granted waivers to allow eight nations to continue buying Iranian crude oil, despite the sanctions that were imposed. Mr Trump stated this week that he did not want to drive up oil prices, easing worries about tighter global supply. Consequently, the slide in oil prices has negatively impacted commodity currencies like the CAD and NOK, which often trade in a positive correlation with oil prices.

  •  GBP/NOK is up 2.5% and GBP/CAD is up 3.6% in the last seven days.

*The rates displayed by our free currency converter are neither "buy" nor "sell" rates, but interbank rates, the wholesale exchange rates between banks. Interbank rates don’t include the spreads, handling fees, and other charges that may be assessed by foreign exchange providers. Please note that, as such, these rates are provided for indicative purposes only. Prior to booking a transaction, Western Union Business Solutions will advise you of the actual rate then available for a particular currency transaction.

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