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Elusive Brexit breakthrough sees Sterling slip

GBP - British Pound

There was some optimism at the start of the week that cross-party talks over Brexit may achieve some sort of breakthrough on Tuesday however this misplaced hope quickly faded and GBP/USD rapidly fell away throughout the day. After being near to hitting 1.32 at the start of Monday's Asian session we are now back to around the 1.3050 level with politics continuing to hold the quid captive and extra downward pressure being applied by an apparent deterioration in the US/China talks.

Talks between Conservatives and Labour continue today with holders of pound hoping an agreement over some sort of temporary customs union with the EU will come to its aid however this seems someway off given yesterday's fairly downbeat comments from either side.

Despite the ongoing Brexit uncertainty analysts are expecting a Q1 2019 GDP print of 0.5% q/q this Friday, much better than was hoped a couple of months ago however the accompanying month on month reading is expected to be flat showing an economy grinding to a halt again.

Key Movers

Despite Brexit continuing to be the main filler of column inches within the UK, in the wider world US/China trade talks remain the primary global economic issue. Although the talks were dragging on it was hoped some sort of breakthrough would be reached soon however Donald Trump's twitter offensive on Friday broke the calm and equity markets were sold off as a result. Asian markets took another leg lower overnight and one of best barometers of global risk appetite, USD/JPY briefly slipped 110 overnight, although the big number has been regained as Europe has come online. It remains to be seen if another hike in tariffs will be implemented by Trump as threatened with markets hoping it was just sabre rattling in an effort to accelerate a conclusion to the impasse.

Further afield there has been some surprising monetary policy moves from Australia and New Zealand with unexpectedly hawkish and dovish moves seen throughout the week. Monday night saw the Reserve Bank of Australia bullishly hold rates when a cut was predicted, then last night the Reserve Bank of New Zealand shocked markets with a rate cut with both central banks now aligned at 1.5%.

Expected Ranges

GBP/USD: 1.2980 - 1.3125 ▼

GBP/EUR: 1.1580 - 1.1720 ▼

GBP/AUD: 1.8520 - 1.87 ▼

GBP/NZD: 1.9705 - 1.99 ▼

GBP/CAD: 1.7495 - 1.7675 ▼