Brexit talk still dominating after upbeat week for the Pound

​​​​​​Today's news headlines:

  • 'Weak Euro lifts Dollar, Pound zooms on talk of second Brexit vote’. Yet more soft economic data pushes the Eurozone closer to a recession. This is weighing on the common currency, while speculation that another Brexit referendum could be held and overturn the 2016 decision bolsters Sterling. (Reuters)
  • 'Italian coalition approves two flagship election promises’. Despite opposition from Brussels, Rome manages to push through key anti-austerity measures offering improved unemployment benefits and a reduced pension age for some. (Financial Times)
  • 'U.S. weighs lifting China tariffs to hasten trade deal, calm markets’. In a series of meetings, US Treasury Secretary Steven Mnuchin is pushing to advance talks, and Donald Trump wants a deal. The shift in sentiment is providing support for the US Dollar as a result. (Wall Street Journal Online)

In many respects, there’s still little clarity over exactly how the UK’s future relationship with the European Union will map out. However, with the idea of a no-deal Brexit continuing to ebb away, it has certainly been a week of strong gains for the Pound. Against the Euro, Sterling is on course for its best weekly run since September 2017, with news of Labour MPs defying Jeremy Corbyn’s lead and attending talks with the Prime Minister adding more upside. The fact that there has been a slew of economic data highlighting the slowing Eurozone economy is also providing some direction here, although it’s important to bear in mind that there’s still a lot of work to be done. With messages from the remainder of the European Union continuing to appeal for the UK not to leave, it’s evident that the economic and social impact of Brexit will be far-reaching. As this situation plays out in the coming weeks, further big moves for the Pound are to be expected and could be in either direction.

The stand-off between China and the US may be showing signs of thawing, with media reports that tariffs could be scaled back in a bid to calm increasingly volatile markets and accelerate trade talks. The clock is ticking as on March 1st, tariffs on $200 billion Chinese goods are set to increase from 10% to 25%. As has already been seen, the impact of this strategy has been wide-reaching, from informal Chinese boycotts of US goods, China levying retaliatory import tariffs, and aspects such as slowing iPhone sales in China hurting one of the largest companies in the US. With a Chinese delegation due in Washington later this month in a bid to progress talks, this posturing has been well received by the stock market, although there is some US government opposition. So far, gains for the US Dollar have been limited, but sentiment could improve if there are signs of progress being made.

GBP/USD

The Pound has posted a solid week of gains over the US Dollar, and this theme continued during yesterday’s session. Consolidation has been seen overnight, but more positive news over Brexit talks could pave the way for another leg higher ahead of the weekend break.

EUR/USD

The Euro has been stuck in an increasingly narrow range against the US Dollar overnight, remaining close to two-week lows.

GBP/EUR

The Pound hit fresh two-month highs against the Euro during yesterday’s session, with Brexit dominating the agenda. The softer any perceived Brexit—if it happens at all—the greater the level of support which should be expected to be seen in the short term for the Pound.