Euro Dominates Forex Markets as Brexit Goes On

James Randall

European Union and United Kingdom flags brexit concept background. 3D illustration of UK and EU flags.The euro continued its run of good luck on Wednesday after signs that a Brexit deal may be on the cards continued to persist.

The single currency managed to dominate the pound over the course of the day, and it went up 0.2% to £0.8719.

This rise came after Italy sent a new budget submission to the European Commission. While the Italian government did not change the contentious aspects of it, the documents did indicate that the country’s debt is falling.

It also benefitted from increased optimism around the outcome of the ongoing Brexit process, which is aiming to work out the terms of the UK’s departure from the EU.

Despite the fact that a deal may be on the horizon, the pound did not respond well over the course of the day. This is down in large part to the requirement on Prime Minister Theresa May to get the deal past her Cabinet, her Conservative Party and eventually through Parliament.

As a result of the political instability, the pound dropped by 0.22% against the US dollar, reaching $1.2942 at one stage.

The rise in the euro’s performance spelt trouble for the US dollar.

The dollar index, which is a value tracker comparing six global currencies to the dollar, dropped by 0.09 and reached 97.22 – a far cry from its recent highs.

The forex trading week is beginning to edge towards a close, but there’s still a fair amount of economic calendar events to watch out for.

This morning sees data on the EU’s trade balance for September, and this will be followed by a speech from an important European central banker.

Peter Praet, a member of the European Central Bank’s Executive Board, will speak at 1.10pm GMT.

Over in the US, retail sales information for October is out at 1.30pm GMT. Month on month, this is expected to rise from 0.1% to 0.5%.

A speech by the US Federal Reserve’s chair Jerome Powell will take place at 4.30pm GMT. Given that the Federal Reserve has indicated several times in recent months that it is considering raising interest rates again before the year is out, this is likely to be a significant speech which could hold plenty of clues for traders.

Tomorrow morning will see another central banker speak. This time it will be Mario Draghi, who is the President of the European Central Bank. He will speak at 8.30am GMT.

Industrial production figures covering October are due out of the US at 2.15pm GMT. These are expected to show a slight month on month drop from 0.3% to 0.2%.

At the same time, the US will also release its capacity utilisation data covering October. This measures the percentage of American production capacity which is in fact put into action during a certain month.

Analysts expected that this will show a slight rise this month, from 78.1% to 78.2%.

At 4pm, the Federal Reserve Bank of Kansas City will release its Survey of Manufacturers covering November.


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James Randall
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