Euro Flat On ECB Patience, Pound Unimpressed By Brexit Delay

Marco Green
April 14, 2019

European Union leaders this week agreed to an up to six-month delay to Brexit, removing the immediate threat of a no-deal exit for Britain but also leaving the likelihood of months of political uncertainty in the UK.

EUR/GBP briefly touched on a three month high of 0.8650 on Tuesday evening, and while the pair has been unable to hold these weekly highs, the pair still trended slightly above the week's opening levels at the time of writing - near the level of 0.8622.

The dollar index last stood at 96.93, flat on the day after having slipped to a two-week low of 96.823 on Wednesday.

Also pressuring the dollar was USA consumer price data released on Wednesday which showed a weakening picture.

"Some people say the minutes contained few surprises but a close look suggests the Fed is likely to become more dovish as time goes by", said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank. The euro was up modestly, seeing a 0.05 percent gain against the dollar to trade at $1.1279.

The Euro (EUR) hasn't been able to capitalise on the Pound's Brexit jitters, due to mixed Eurozone data and a cautious tone from European Central Bank (ECB) President Mario Draghi yesterday.

He also confirmed the ECB was considering if measures were needed to mitigate the impact on banks of its negative deposit rates as well as the pricing of new cheap two-year loans to banks.

The news from the European Central Bank saw euro prices hold around the $1.1276 mark in its pair with the U.S. dollar, which was a recovery from Wednesday's low of $1.2295.

Against a rallying euro the pound held its own and was unchanged at 86.24 pence by 1325 GMT.

Connor Campbell, analyst at Spreadex, said: "Sterling continued to show no signs of relief that Brexit has been delayed, the currency now requiring more from the Government than mere postponement".

Global stock markets slid on Thursday after European and U.S. central banks raised the prospect of a worldwide economic slowdown and the United Kingdom signed up for another six months of Brexit uncertainty. "But while I'm no expert on British politics, it seems hard for the parliament to come to any agreement", said Kazushige Kaida, head of forex at State Street Bank. "Once the dust settles, I would expect to see selling in sterling", he added.

Further falls past those January 2018 lows would leave implied volatility back at levels last seen before the 2016 British Brexit referendum. The Shanghai Composite Index slid 1.6%, Hong Kong's Hang Seng dipped 0.8%, and the SZSE Component Index dropped by more than 2.5%.

It barely moved after China's factory-gate inflation picked up for the first time in nine months in March, edging away from deflationary territory, in a fresh sign of a boost to economic activity from stimulus. Among the major currencies, the Australian dollar was the biggest gainer against USA dollar posting an upsurge of 0.61 percent to $0.7166, while most of the emerging market currencies such as South African Rands and Mexican Peso remained upbeat following another dovish FOMC minutes.

Other reports by Click Lancashire

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