Sterling tentatively up but US Dollar steals spotlight away from buying Euro exchange rate gains (Joshua Privett)
The very politicized landscape for 2017 has struck the currency markets once more, with Sterling gaining strength following very encouraging economic performance news, but still losing out heavily to improvements on the US Dollar and Australian Dollar today.
I’m sure many of the readers here would have seen the news coming out in the last 24 hours about the alleged ties between Trump and Russia. Rather than Russia seeming to be the outside actor influencing the election, there is now talk of the Trump campaign team and Russia actively working together.
What does this have to do with exchange rates?
The value of the US Dollar is heavily linked to the Australian Dollar, and today was the confirmation hearing for the US Secretary of State. With all of this news, markets were worried he would flounder and create an issue for his confirmation hearing. Quite the opposite. He confirmed the party line and seemed to allude to a continuation of previous foreign policy under Obama (i.e. critical of Russia), and market confidence in the Dollar soared, taking the Australian Dollar with it.
So US Dollar and Australian Dollar sellers were gifted some tempting exchange rates from this sudden situation found in the US and the way it was dealt with.
The positive news today for the Pound, however, is still suggestive of further improvements for Sterling in the medium-term. The Supreme Court could be released any day from tomorrow now that they are back in session, and the anticipated result should improve Sterling’s buying power against its major currency pairings.
As in November, when the initial ruling from the Judicial Court stated that Parliament must be consulted to trigger Article 50, rates for buying Euros and Dollars soared.
However, as we edge closer to Article 50 being triggered, this is causing heightened anxiety surrounding the Pound. The sudden drop in the Pound on Monday in reaction to Theresa May’s very vague and hardly shocking comments in an interview on Sunday.
So with the risk of May and other European leaders having to make more and more comments on the aims of the negotiations as we edge closer to March, it can be argued that the clear result of the Supreme Court decision could bring a ‘sweet spot’ on buying Euro and Australian Dollar rates in particular before we edge further into this period of heightened political risk to the value of the Pound.
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