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Sterling jumps on reports a Brexit deal is close

By Jake Trask

Sterling has rallied over the past 24 hours rising around two cents against the dollar as positive Brexit news supports the pound. Firstly, Brexit Secretary, Dominic Raab has claimed he expects a Brexit deal to be done by the end of November with him possibly appearing before a Brexit committee on November 21st if all falls into place. Secondly, a report published in The Times overnight claims that Theresa May has struck a deal with the EU with regards to the keeping continued access to the financial markets. The rally overnight has been supported with corroborating reports in other news outlets this morning pushing GBP/USD above 1.29. Before we get too excited it should be remembered we have been here before re: positive news reports over a deal and the Irish border situation has continued to remain the sticking point. Despite this it appears some optimism has returned to the situation and the pound has benefitted as a result. Today’s big news is the quarterly Inflation Report from the UK which under normal circumstances would be a major sterling mover, however its likely we could get a more muted response given its being released in what could be the final stages of Brexit negotiations.

The greenback is lower across the board this morning after a strong showing yesterday. EUR/USD was close to breaking below 1.13 for the first time since June last year however the big number has offered strong support again after being close to being broken mid-August. With stock markets in America continuing to perform well and last week’s GDP number printing in the green it seems the dollar will likely continue to be the star member of the G10 space for the time being. Data-wise yesterday’s ADP Non-Farm employment change comfortably beat expectations at 227k vs a predicted 188k, which has added to the feeling we are due a positive monthly jobs report from the States tomorrow.

Italian budget concerns continue to weigh on the euro however extra downward pressure has recently been exerted by the news that German Chancellor, Angela Merkel will not seek another term in charge after 2021. Merkel has been one of the keenest advocates of holding the euro together since the financial crisis and the perceived loss of stability in European politics after she departs has worried investors. It’s a quiet day data-wise from the Eurozone with many countries observing the All Saints Day bank holiday. GBP/EUR is up to 1.1340

The Australian economy posted a healthy trade surplus overnight with Septembers AUD3.02b reading nearly double what many had been expecting. This combined with the aforementioned dollar weakness has helped push AUD/USD through .71 to around .7160 now. The next big release will be Australian Retail Sales due tonight with another uptick of 0.3% penciled in. GBP/AUD sits at 1.8025.

USD/CAD is heading back down to the 1.31 handle this morning making gains against a greenback that has been sold off. It’s a quiet day from Canada however there is plenty on the menu tomorrow. Employment Change, Unemployment Rate and Trade Balance figures are all due at 1:30pm. Chuck into the mix the US jobs report is due at the same time it will likely be a very whippy end to the week for USD/CAD. GBP/CAD trades at 1.6910.

NZD/USD has pushed above .66 again this morning. Tomorrows US data will be the main mover of the local dollar until next week’s Employment figures from NZ. GBP/NZD is at 1.9515.