Brexit and Scottish Referendum weighs on the pound

14th March 2017 Market Update

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?? GBP – With the UK’s economic calendar lacking any notable data, Sterling gained ground from external factors, throughout the day. The pound rose against the dollar, as investors expected the UK’s lower house of parliament to over-ride the upper house’s changes to Brexit legislation. This removed uncertainty about the UK’s exit strategy.

Other movements were influenced by Nicola Sturgeon’s announcement for a second Scottish independence vote which will test the appetite for risk among investors of the pound.

As Sturgeon’s announced plans seek to add pressure on Theresa May, Sterling remained strong, ending the day 0.66% higher against the euro.

Furthermore, the Bill that gives Theresa May the power to trigger Article 50 has now completed its passage through parliament. This meant that the pound subsequently gained 0.4% against the dollar yesterday. However, this morning we have seen a sharp decline in the rate as the Bill is passed through for royal assent.

?? EUR – ECB President Mario Draghi delivered a speech in Frankfurt, discussing higher productivity growth, in line with wages and new technologies. This failed to make an impact on the market however, due to it being overshadowed by Brexit.

?? USD – The Federal Open Market Committee will hold a two-day monetary policy meeting, which starts today. Although the market has already priced in nearly a 90% chance the Fed will hike rates on Wednesday.

An interest rate rise would boost the dollar’s value, as it enhances the appeal of US assets.


Key Announcements

?? GBP
No high impact data expected.

?? EUR
11:00am – German ZEW economic Sentiment expect to improve from 10.4 to 13.2.

?? USD
1.30pm – PPI m/m expected to improve from 0.6% to 0.1%.


Our View:With the Federal Reserve looking certain to raise interest rates, much has already been priced in. While it remains likely the dollar could strengthen from this, it is even more likely that we will see movements from Article 50 and the Bank of England’s rate decision on Thursday.


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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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