Daily Currency Update

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May considers ‘nuclear’ general election option to push her Withdrawal Agreement

By Sebastien Clements

After more failed attempts last week to finally gain some clarity on the Brexit situation for Theresa May and parliament – sterling is once again subject to immense pressure by the market, with only 11 days left until Britain ‘crash out’ of the EU without a deal. It is now of upmost importance that the British government now try and band together or compromise in order to avoid total isolation from the 27 EU states – Britain’s largest trading partners. The British currency is on track for its biggest monthly loss in the last five.

The UK how has 3 main options with regards to Brexit: leave with no deal, host a general election or forge a softer divorce with the EU. Further votes will be held in parliament later today in order to try and establish the will of the house of commons. The uncertainty continues and with this, sterling is paralyzed particularly with the prospect of a general election.

A strong end for the dollar towards the end of last week but shifting eyes towards this week, we have the monthly non-farm employment figures followed by the more important retail sales report. Due to the nature of the US consumerism retail sales is always a very good indicator of US household intentions and provides a good indication of confidence and spending.

Continued economic uncertainty has once again plagued the Eurozone, with slow economic data coming out of France, Germany and Italy for another month. It is expected that this trend will continue into April and through into later in the year. We will have more of an idea about the extent of this slowdown on Wednesday when the service PMI’s for Spain, Italy, Germany and France are released.

The Australian Dollar has continued its surge as concerns grow about a slowdown in the US. Just the one release overnight and this was private credit sector credit. The number showed credit grew 0.26% in February, while the annual growth edged lower to 4.2%. GBP/AUD has moved lower moving from a high of 1.8718 down to 1.84.

The Canadian Dollar was the strongest performing currency at the end of last week, after January’s local GDP report was released. Against a forecast of 1.3% year on year growth, Canada’s GDP report posted a figure of 1.6%. At a time where the majority of major economies are slowing, this data is very positive for Canada and in turn, CAD.

The Kiwi is still on the back foot following last week’s dovish message from the Reserve Bank of New Zealand but a reprieve could be on the cards with the latest Chinese manufacturing data bouncing back as well as the business confidence survey from the Institute of Economic Research.