British Pound Strengthens Despite Negative Brexit News

Market Reviews

Australian dollar is trading as the strongest one, as supported by upbeat RBA statement released earlier today. US dollar is weak, awaiting results of the US midterm election. On stock markets, FTSE lost 1.06%, DAX dropped 0.42% and CAC fell 0.52%.

The euro rose against the US dollar after declining at the beginning of the session on weak data on business activity in the Eurozone private sector. Eurozone PMI services was finalized at 53.7 in October, down from prior month’s 54.7. PMI composite was finalized at 53.1, down from September’s 54.1. Italy PMI composite dropped to 49.3 (a 59-month low). German PMI composite also dropped to 5-month low of 53.4.

The British pound is trading as the second strongest, despite more Brexit negative news. There was no progress on Brexit after UK Prime Minister Theresa May’s Cabinet meeting. Theresa May’s spokesman James Slack told that there’s still a “significant amount of work” to do, “across government” on how the exit mechanism might work. The discussion inside the Cabinet was “constructive” and there was a shared view that the UK cannot remain in the “backstop indefinitely”.

The pound retreated from 2-week highs against the dollar, in response to the pessimistic comments of the leader of the Northern Irish Democratic Unionist Party (DUP) Jeffrey Donaldson, who expressed concern that the negotiation process was moving in the direction of no deal Brexit.

Earlier today, RBA left cash rate unchanged at 1.50% as widely expected. RBA noted that GDP growth forecasts for 2018 and 2019 were “revised up a little” to around 3.5%. GDP growth would slow in 2020 due to “slower export growth or resources”.