The pound sterling finally saw some gains yesterday after Prime Minister Theresa May survived a vote of no confidence in her leadership over the Brexit issue.
Some of May’s colleagues in the Conservative Party brought the vote against her. However, she managed to secure 200 votes in a secret ballot – pushing her well over the level needed to stay in office.
However, the government is far from out of the woods. It is believed that the next key test for the government will be whether or not it can get its Brexit deal through parliament – which is looking to be in doubt.
The pound rose by 1.14% to $1.2627 on the news of May’s success, pushing it up from the 20-month low it had experienced earlier in the week.
The euro suffered a little as a result of the pound’s gain, dropping by 0.6% to 99.05 pence. However, it did manage to surge in relation to the US dollar, going up by 0.45% to $1.1369. The dollar suffered over the course of the day after a political spat between Donald Trump and Congress over the budget.
Trump told members of Congress that he wouldn’t agree to the government’s overall budget unless they agreed to pay for his suggested “border wall”.
As well as boosting the EUR/USD pair, the developments also caused the dollar index, which measures the greenback’s performance in relation to a number of other international currencies, to drop 0.34% – ending up at 97.054.
The developments for the euro also came in part because of news that the Italian government has agreed to a budget deficit target of 2%, rather than the 2.4% level which was causing consternation with the European Union.
The rest of the week has a number of key moments for forex traders to monitor.
The European Central Bank will release its interest rate decision at 12.45pm GMT today. This is expected to hold firm at 0%, with interest rate rises not believed to be on the cards until at least next year.
At 1.30pm GMT, there will be a statement from the ECB discussing this, as well as a press conference.
Also at 1.30pm GMT, the US import price index for November will be announced. Month on month, this is expected to show a substantial change from 0.5% to -0.9%.
The export price index for the same period, meanwhile, is expected to show a decline from 0.4% to -0.1%.
Canadian housing price index information for October is also due. This is expected to stay still at 0% month on month.
Looking ahead to Friday, Chinese retail sales data for November is due overnight. This is expected to show a move from 8.6% to 8.8%.
The Spanish National Institute of Statistics is due to release its inflation and price movements information at 8am GMT for November. This is forecast to hold firm at 1.7%.
Italian industrial orders and industrial sales information for September is due at 9am. This is likely to be watched closely given the current relevance of the Italian economy and its government budget policy to the forex markets.