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GBP/USD regains the 1.30 handle amidst dollar weakness

By Jake Trask

GBP/USD rallied yesterday ahead of another round of Brexit talks between Prime Minister, Theresa May and European Commission President, Jean-Claude Juncker. The EU has repeatedly refused to make any legal amendments to the Irish “backstop” which ties the UK to EU customs rules in an effort to avert a hard border returning between the Republic and Northern Ireland. Despite this May will keep on pressing for changes to the arrangement outlined in her withdrawal agreement in an effort to get it accepted in parliament. As the clock runs down it seems we will see an extension to Article 50 requested from the UK in an effort to avert a no-deal departure and this is likely to be the reason we saw sterling rally yesterday. Aided by some dollar weakness permeating the markets GBP/USD rapidly pushed up from around 1.2920 at midday to a high of around 1.3065 by the time London clocked off for the day. We have seen 1.3075 hit during the Asian session overnight before a retracement this morning. Away from Brexit, data yesterday saw UK unemployment remain at 4% with wages holding steady at an annualised 3.4% rise.

The dollar has pared some its losses seen yesterday ahead of the release of the latest Federal Open Market Committee minutes due this evening. The minutes from January 30th policy decision where rates were held are likely to indicate the Fed is unlikely to hike rates in the next few months with some expecting a pause for the whole of 2019 to be signaled. Trade talks are due to continue between the US and China later this week with Donald Trump hinting he may delay the imposition of further tariffs should sufficient progress be made. At present a further slew of charges on Chinese imports are due to be actioned on March 1st however yesterday Trump stated there was no “magical date” for them to be imposed. USD/JPY trades at 110.84 with EUR/USD holding around the 1.1340 level.

Yesterday saw a slightly more upbeat than expected German ZEW Economic Sentiment survey released with a score picking up slightly from -15 to -13.4. A slowdown in China remains the biggest headache for German business’ and recent data showing Germany narrowly missed a recession highlight the struggles they are going through. It’s a quiet day with tomorrows monthly Eurozone PMIs the next event of note from the EZ. GBP/EUR sits at 1.1485 down from 1.1530 briefly seen during yesterday’s US session.

The Aussie benefitted from USD weakness yesterday with AUD/USD rising from around .71 to reach a high of around .7175 overnight. A slightly weaker than expected wage growth number from Australia has pushed the Aussie lower aided by a slight recovery in USD strength. The quarterly Wage Price Index number saw incomes hold steady at 0.5% growth when an uptick to 0.6% was being eyed. Tonight sees employment numbers being released by the Australian Bureau of Statistics. GBP/AUD sits at 1.8205.

Brent Crude trading around the $62pb handle all week has helped keep USD/CAD under the 1.33 handle for much of the week. Yesterday’s dollar sell off helped push it below 1.32 where it currently trades. Tonight’s FOMC minutes will be main event of note to impact the loonie ahead of Friday’s Retail Sales numbers. GBP/CAD sits at 1.7190.

The kiwi flew higher yesterday mirroring other currencies moves against the greenback. NZD/USD made a play for .69 before retracing back to its current .6865 level. There is no data of note from NZ this week so trade and the FOMC will be the main drivers of the local buck. GBP/NZD trades at 1.8980.