Signs of progress regarding Brexit saw the pound close last week’s session on a high as markets welcomed comments by the EU’s chief Brexit negotiator Michel Barnier.
For now, Sterling is holding steady at the start of this week’s session with GBP/EUR muted at €1.1185, GBP/USD flat at $1.2917, while GBP/AUD and GBP/NZD are holding steady at AU$1.8179 and NZ$1.9794 respectively. Only GBP/CAD is showing any positive movement so far this week as the pairing ticks up to C$1.7034.
Looking ahead, the UK will publish its latest trade and production figures this morning, with the pound potentially advancing should they print higher than forecast.
What’s been happening?
The pound roared higher at the end of last week’s session, fueled by comments from Michel Barnier indicating that the EU was committed to reaching a deal with the UK.
In documents released on Friday, Barnier stated that it was the EU’s aim to ‘establish the closest relationship possible’ with the UK post-Brexit and that a no-deal scenario is not part of the EU’s plan.
Barnier also suggested that the EU was open to discussing other backstops for the Irish border, boosting optimism that the two sides may be able to reach an agreement over one of the most divisive points of negotiation.
This positive Brexit sentiment gave an extra boost to GBP/EUR after the euro stumbled on Friday morning when the Eurozone’s latest GDP estimate saw annualised growth revised down from 2.2% to 2.1% in the second quarter.
Meanwhile the GBP/USD exchange rate found its gains trimmed at the end of last week’s session following the release of the latest US employment figures, with the US dollar able to recoup its losses thanks to a solid rise in US payrolls and a surprise jump in average hourly earnings in August.
What's coming up?
The start of this week’s session will likely see markets focused on the pound as the UK publishes its latest trade and production figures.
We could see Sterling build on the gains seen at the end of last week should either the UK’s trade balance figures or industrial production data impress investors.
Further gains for the pound may also be derived from the latest NIESR GDP estimate with economists forecasting August will have seen a welcome jump in UK growth.
Meanwhile with no notable Eurozone data releases today, EUR investors may be left to focus on the European Central Bank’s (ECB) upcoming policy meeting as markets await further information regarding the bank’s plans to wrap up its stimulus programme.
Finally the US dollar could find itself back in vogue today if the ongoing emerging market sell-off sees demand for safe-haven currencies continue this week.
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