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