Summary:
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GBP moving higher against most of its peers
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The pound supported by latest Brexit developments
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EURGBP pulls back from possible resistance 0.8860
Given the heavy newsflow surrounding Brexit negotiations of late, the pound has held up pretty well with reports of a lack of progress on a future deal and even speculation of a vote of no confidence for PM Theresa May failing to cause a large sell-off. This relatively diminished sensitivity to perceived bad news could be seen as a good omen for sterling, with the logic behind this school of thought being that a failure to drop on bad news means that the currency could rise on any good, or even less bad, developments.
The pound is rising against most of its peers on the day with only the JPY, which is benefitting from safe haven flows, outperforming. Source: xStation
On this front there’s been an interesting story out this afternoon which has caused a flurry of buying in the pound, although the gains have since been pared somewhat. Irish broadcaster RTE reported that the European Union was planning to offer a UK-wide customs union as a way to break the deadlock over the Irish border issue. This proposition would solve one of the stickiest points of contention in the ongoing negotiations. A so-called hard border between Northern Ireland and the Republic of Ireland after the UK withdraws from the trading bloc would be avoided if this plays out, something which PM May gas said is essential.
The EURGBP has been rising in recent weeks on some weakness in the pound, but the gains are fairly measured considering the political backdrop in the UK. 0.8860 remains potentially key resistance for this market while a break below the rising trendline (in yellow) could open up a retest of recent lows around 0.8725. Source: xStation
