Could an extension to Article50 strengthen the pound?
Over the last 4 weeks the pound to US dollar exchange rates have increased due to the political events in Parliament. We learnt last night that the UK public could be back at the polling stations as MPs voted for the 2nd time against a snap general election. In addition, this week the bill to gain an extension to Article50 gained Royal assent, therefore the chances of the UK crashing out of the EU on the 31st October looks unlikely.
History over the last 3 years tells us that extensions to Articl50 tend to strengthen the pounds hand. Therefore if we are heading for an extension, the pound could recover some of the losses we have seen over the last 6 months. Now that Parliament is shutdown, we expect it will be commentary from the Prime Minister that has the most amount of influence on sterling exchange rates.
ECB to release their latest interest rate decision
In regards to economic data, its an important week for the European Central Bank. The ECB will release their latest interest rate decision on Thursday. All eyes will turn to President Mario Draghi to see if further Q.E is on the horizon and if interest rates will be cut. As EUR/USD is the most traded currency pair globally, if the euro struggles on Thursday due to the data release we could see the US dollar benefit and therefore GBP/USD fall.
US retail sales numbers look set to fall
There is a mixed bag of data set to be released at the end of the week for the US. Inflation data is set to released Thursday and a slight rise is expected. On Friday retail sales numbers are to be released and they look set to fall. Could one data release counteract the other? Potentially, but we could see opportunity for buyers and sellers of US dollars.
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