Sterling Suffers Losses on Brexit Fears, GBP/AUD in Tight Range

23 August 2017 by News Desk   |   SHARE  

The British pound has been experiencing a terrible month which only worsened on Wednesday as sterling softened further against its currency peers on account of Brexit fears and strong economic data being printed elsewhere. The Eurozone has been strengthening considerably, while the UK economy has been falling behind. As Brexit drags GBP lower against the EUR, many industry experts are wondering if parity could be achieved. Meanwhile, the pound to Australian dollar (GBP/AUD) exchange rate managed to remain in a tight range.

However, the pound may be able to regain some strength against the single currency if European Central Bank (ECB) President Mario Draghi disappoints markets later this week. On Wednesday Draghi spoke in Germany ahead of this week’s highly-anticipated Jackson Hole event. Draghi managed to swerve all discussions of monetary policy, creating speculation as to whether markets would see any talk on the hot topic this week.

On Wednesday the euro jumped to a two-year high against a host of major currencies and an eight-year pinnacle versus the pound—with the exception of last year’s flash crash— as the outlook for the UK and the currency bloc diverged. Both Germany and the Eurozone posted strong manufacturing and composite purchasing managers’ indexes (PMIs) mid-week which helped to buoy the euro, while sterling was pressured lower by concerns over a post-Brexit trade deal.

Meanwhile, the Aussie remained well supported at the start of the week as iron ore prices continued to firm. However, Wednesday saw the price of iron ore stumble as a sell-off in steel caused weakness in the raw material after prices had been trending at a five-month high.

Still, to come this week is the UK’s second growth estimate for Q2 which could create problems for the pound if it falls below expectations. In addition, Germany’s final second quarter growth stat and German business assessment indexes will be released. Further positive data out of the Eurozone or any hawkish remarks by Draghi could result in another fall in sterling.

The GBP/EUR exchange rate is trending in the region of 1.0851. The GBP/AUD exchange rate is trading at around 1.6210.

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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