The pound got off to a strong start this week, as the currency was sent higher once again following fresh comments from the EU’s chief negotiator Michel Barnier regarding Brexit.
Sterling appears to be consolidating these gains this morning with GBP/EUR steady at €1.1219, GBP/USD edging up to at $1.3060 and GBP/CAD stable at C$1.7188, while GBP/AUD and GBP/NZD hold at AU$1.8356 and NZ$1.9999 respectively.
Looking ahead, the release of the UK’s latest employment figures could lend further strength to the pound later this morning if domestic wage growth has risen in July in line with market expectations…
What’s been happening?
There was a serious case of déjà vu at the start of this week’s trading session as the pound’s performance almost perfectly mirrored that of Friday, as it surged higher in the wake of comments by the EU’s chief Brexit negotiator Michel Barnier.
Speaking in Slovenia, Barnier stressed the need for a Brexit deal to be reached by November, but followed this with a suggestion that it was ‘realistic’ that the UK and EU could reach an agreement within 6-8 weeks, much to the relief of GBP investors.
The remarks were well received by markets and led to an immediate surge in Sterling exchange rates, despite Barnier warning that a number of issues still needed to be solved, chief of which being the Irish border.
While the Pound was able to translate this into marked gains against the majority of its peers, the currency’s weighting against the euro proved to be more limited as the advance of the GBP/EUR exchange rate was slowed by optimism that Italy’s fiscal policies will not break EU spending rules.
Meanwhile the GBP/USD exchange rate appreciated by as much as 1% on Monday, with the US dollar shedding some of its recent gains as it was undermined by a bout of profit taking amidst a lull in other developments.
What's coming up?
The pound may look to extend its gains later today as the UK publishes the latest labour figures.
Economists forecast today’s data will reveal that UK wage growth climbed to 2.5% in July, while unemployment held at a 43-year low of 4%.
This would see average earnings in the UK keeping pace with inflation at the start of the third quarter, helping workers avoid a fall in real wages and hopefully preventing consumers from cutting spending.
Meanwhile the euro could struggle during today’s trading session, with ZEW’s latest economic sentiment index for Germany potentially falling deeper into negative territory as economists become increasingly concerned about the impact of global trade tensions on Europe’s largest economy.
Finally the US dollar may find its feet again today as another robust reading for US jobs openings is expected to confirm that the domestic labour market is indeed strengthening
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