GBP fluctuates as Theresa May attends Brexit crunch talks

Theresa May was in Brussels yesterday, and hopes that she would satisfy EU demands for sufficient progress on issues such as citizens’ rights and the Irish border gave Sterling a boost.

Sterling is on poor form this morning however. GBP/EUR has fallen -0.4% to €1.1303, while GBP/USD has fallen -0.5% to US$1.3413. GBP/AUD has tumbled -0.9% to AU$1.7555, GBP/NZD by -0.7% to NZ$1.9480, and GBP/CAD by -0.6% to C$1.6985.

Read on to see what data could fuel a pound recovery today…

What’s been happening?

The pound was on a bit of a rollercoaster yesterday, as Prime Minister Theresa May tried to hash out Brexit details with EU officials in Brussels.

Markets were initially apprehensive, and Sterling weakened, but hints that the two parties were agreed on the issue of the divorce bill and that a deal might be reached by the end of the day saw Sterling shooting higher.

However, the Irish border quickly emerged again as a sticking point. Markets thought the problem was resolved when the UK government conceded to allowing the entire island to remain under single market regulations, thereby avoiding the need for hard customs border between Northern Ireland and Ireland.

However the DUP, whose support Theresa May currently relies upon in order to have a majority in Parliament, have claimed they would not support such an arrangement.

All in all GBP/EUR and GBP/USD ended the day barely any better off than at the start of the London session.

GBP/EUR was given some respite by the fact that the strength of the US dollar was weighing on the euro.

A worse-than-expected fall in the Eurozone investor confidence index further helped keep the euro soft.

GBP/USD struggled as markets were reacting to the news that the US Senate had approved a tax reform bill, allowing President Donald Trump to enact the biggest shakeup of taxes in three decades.

What's coming up?

The UK services PMI for November is set for release shortly.

Although a slight fall is forecast for this reading for UK’s economic powerhouse, the fact that Friday’s manufacturing index and yesterday’s construction index both rose above forecasts suggests markets may be in for an upside surprise.

This could send the pound markedly higher, unless Brexit developments are distracting markets.

There is a slew of Eurozone data set for release today, but much of it is finalised versions of earlier PMIs. Unless there is a change to initial estimates, these may not have much of an impact upon the euro.

Fresh Eurozone retail sales figures covering October may have more influence.

Assuming markets can take their mind off the prospect of tax reform the ISM non-manufacturing composite index could cause some volatility today for the US dollar.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Reaz Rahman
Senior Dealer

Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.