Stablity for the Pound
25 September, 2017
Friday’s trading was relatively flat, apart from a 30 minute window where we saw the Pound drop 1/2 cent where Theresa May was giving her speech in Florence. Not much of a romance in Italy as the PM may have been hoping for. The main topics covered related to the future relationship between the EU and UK, a two year transition period afer the UK has left the EU in 2019 and hoping for a ‘bold trade programme’ going forward. However some of the more prominent members of the EU countries are left far from convinced by Mrs. May’s speech and still seek further clarity. Macron, has asked for more clarity on the Brexit bill and the rights of EU citizens and believes these issues need to be cleared up first before further trade talks can begin.
The speech was followed with the news that the UK credit rates had been downgraded again by the Moody’s. Main concerns surrounding the UK finances and believes that Brexit would hinder the economic growth of the UK. Having lost its AAA rating in 2013 to AA1, it has now been downgraded to AA2, meaning borrowing money from the international markets could now be slightly more expensive, as a lower credit rating means a higher interest rate on the borrowing.
All in all the weeks trade was stability for the Pound, holding its own against the Euro and the USD. A rare occurrence in recent history and signs of the rates stabilising slightly.
The German elections, that have quietly slipped under the radar in recent times concluded last night. With Angela Merkel, who has established herself as one of the most well known and reputable leaders, winning a fourth term with 32.5% of the votes. The German government is known to have a coalition more often than not, but with Mrs. Merkel’s last coalition partners losing ground it remains to be seen who she will choose to form the government with. The most surprising result perhaps was that the far right group have for the first time got seats in parliament. taking advantage of the decision by Mrs. Merkel to let in migrants in 2015, which was not the most popular decision amongst the German population.
With Germany, one of the more prominent members in the EU and a large influence on the direction of the Euro, could we see the Euro now make up the losses of recent weeks now that the elections are over.
The week ahead
GBP Inflation report hearing
1.30 USD core durable goods order
3.30 Crude oil inventories
9.00pm NZD official cash rates
1.30 USD Unemployment rate/ Final GDP q/q
1.30 GDP m/m
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