Pound rises on latest Brexit developments

Sterling has begun the new week in an upbeat mood with the recent steps towards a more “soft” Brexit buoying the pound which has reached its highest level in almost a month against the US dollar. The FTSE is also in the green, making some small and steady gains in early trade.

Davis resignation fails to halt GBP gains

The root cause of the move higher in the pound has come from events last Friday when PM May received the approval of her cabinet at the Chequers summit for a proposal that marks a significant move towards a “soft” Brexit. The victory is far from final and there remains much to be done to finalise these terms, but the initial reaction in the markets has been a positive one. Even the resignation of Brexit secretary Davis has failed to weigh on the pound with traders clearly of the opinion that a more favourable outcome as far as the markets are concerned is becoming increasingly likely. The gamble from May appears to have paid off and while a leadership challenge remains a threat, comments from both Davis and staunch Brexiteer Rees-Mogg this morning suggest that it isn’t an imminent one at present.   

GDP data in focus

Turning attention to economics from politics, tomorrow sees the first ever monthly release for UK GDP, with the ONS deciding to move away from quarterly releases in an attempt to provide a more accurate gauge for the pace of current economic growth. The UK is one of the first to adopt monthly GDP releases amongst major developed economies, but the move seems logical with long delays and frequent revisions to quarterly releases meaning the data had a significant lag. Last week saw some solid PMI data released, with the services beat particularly pleasing and should there be more good news tomorrow then the odds of an August rate hike will increase further. Global risk sentiment remains fairly upbeat with stocks recovering from their June swoon, as trade tariffs remain a source of concern but not much more as far as equities are concerned at present. Failing a negative political shock for the UK in the coming weeks the backdrop is looking more favourable for a further tightening of policy which would further support an appreciation of the pound.

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