Pound (GBP) Recovers on Brexit Hopes Following Pessimistic Press Conference, GBP/AUD Softens

13 October 2017 by News Desk   |   SHARE  

The pound managed to perform a U-turn against other currency majors at the end of the week; after falling substantially in Thursday’s European session, the British currency made a come-back after European markets closed which has continued into Friday morning’s trading. The pound was up by around 0.40% versus the euro (GBP/EUR) on Friday morning after German newspaper Handelsblatt reported that chief Brexit negotiator Michel Barnier may be willing to offer the UK a two-year transition period out of the EU.

Yesterday the pound languished against other currency majors after Barnier held a press conference with David Davis, stating that the UK hadn’t made enough progress to move on to trade talks and that there was a ‘deadlock’ over how much the UK will pay when it leaves the EU. Sterling tumbled rapidly on the pessimistic news, but the prospect of an adjustment period saw sterling rally 100 pips versus the US dollar (GBP/USD) and could prove to be very sterling positive if it were to be agreed.

EUR Softens on Draghi Rate Comments

Meanwhile, euro weakness can also be attributed to comments from European Central Bank (ECB) Chief Mario Draghi, and his dovish outlook on maintaining rock-bottom interest rates ‘well past’ the end of the central bank’s quantitative easing programme. Draghi stated: ‘The “well past” is very, very important in anchoring rate expectations.’

Other Eurozone nations, such as Germany, have been hoping for an interest rate increase for some time as its economy steams ahead. European Central Bank chief economist Peter Praet commented: ‘We are undoubtedly experiencing a solid, broad-based and resilient economic recovery. But there still seems to be a disconnect between growth and inflation.’

GBP/AUD in Tight Range after Chinese Imports Increase

Meanwhile, as Friday’s session continues the pound has been trending in a tight range against the Australian dollar (GBP/AUD) after Chinese imports grew in the month of September on the year. The annual figure came in at 19.5% up from the previous reading of 14.4% and bypassed expectations of a smaller increase to 16.5%. Any positive Chinese data can bode well for Australia as it’s the nation’s largest trading partner, meaning import figures can be especially important.

The pound to euro (GBP/EUR) exchange rate is currently residing at around 1.1239. The pound to Australian dollar (GBP/AUD) exchange rate is currently trending around 1.6939.

Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.

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