Cable dragged lower by EURUSD

Cable has been dragged lower by declines in EURUSD, which has driven the pair to a two-month low at 1.2944.

The Pound concurrently ebbed against the Euro and Yen, among other currencies. The Pound is showing a 1.9% decline against the Dollar from month-ago levels, and a 1.2% decline against the Euro over the same time frame.

The losses reflect the impact of Brexit uncertainty, which has been notably curtailing business investment and blighting the median- to longer-term outlook of the economy, although one-off Brexit-related stockpiling activity has given the manufacturing sector a boost over the last couple of months.

There is nothing much new on the Brexit front, with Parliament returning from its two-week Easter recess today. Immediate focus will be on talks between the government and the principal opposition, Labour, on forming a workable Brexit compromise. For this to happen, Prime Minister May’s Tory party would have to be split as it would have to concede to the UK remaining in the EU’s customs union, and so far this looks like too high a price for May.

In the mix is a growing grass-roots movement in the Tory party to oust May. Political parties are also readying for the May 23 Parliamentary elections, including 2 new parties — the Brexit party and the Change UK party (the latter being in favour of remaining in the EU).

The UK data calendar is quiet this week and won’t have much bearing on the outlook. Monthly government borrowing data is up (Wednesday) along with the CBI industrial trends and distributive trades surveys (due Thursday and Friday, respectively).

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Andria Pichidi

Market Analyst

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