The pound rebounded against most of its peers at the end of last week as the UK government agreed to a Brexit strategy deal.
Trade in Sterling is mixed this morning, with GBP/USD ticking up to $1.3314 and GBP/CAD rising to C$1.7422, with GBP/EUR is muted at €1.1307 and GBP/NZD holding steady at NZ$1.9462. Meanwhile GBP/AUD is sliding, having struck AU$1.7838 in early trade.
Looking ahead, markets are likely to be focused on UK political developments today, with a possible shakeup of Theresa May’s Cabinet following Brexit Minister David Davis’s shock resignation, potentially damping Sterling sentiment.
What’s been happening?
The pound struck higher against most of its peers on Friday, with GBP investors optimistic after Prime Minister Theresa May and her cabinet managed to agree her blueprint for the UK leaving the EU.
The plans will see the UK seek to create a new UK-EU free trade area which establishes a ‘common rule book for industrial goods and agricultural products’.
While it remains unclear whether the EU will agree to such terms, markets were relieved to see that the UK government appears to be making some progress with Brexit.
The GBP/EUR exchange rate initially slumped by around half a cent at the end of last week’s session, with the euro taking advantage of Sterling’s weakness thanks to a rebound in Germany’s latest industrial production figures.
EUR investors welcomed the rebound in factory output as they helped to ease concerns of a slowdown in the Eurozone’s largest economy, but failed to stave off Sterling’s gains later in the day.
Meanwhile, the publication of the latest US jobs figures help to propel the GBP/USD exchange rate higher on Friday, with the pairing appreciating around half a cent following an unexpected rise in the US unemployment rate.
The accompanying wage figures certainly didn’t do the US dollar any favours either, with hourly earning only rising 0.2% in June, missing expectations of a 0.3% rise and giving less incentive to the Federal Reserve to accelerate the pace of its monetary tightening.
What's coming up?
The UK data calendar is looking pretty sparse today, likely leaving GBP investors to focus on the ongoing Brexit drama.
This resignation of Brexit Secretary David Davis could send shockwaves across currency markets today, with the pound likely to weaken if markets think more Cabinet members could follow suit.
Meanwhile the euro begins this week slightly weakened as Germany’s trade balance for May printed lower than expected this morning.
Finally movement in the US dollar may continue to be driven by trade tensions this week, with the ‘Greenback’ potentially rising should trade war fears cause investors to continue to seek shelter in USD.
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