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Sterling rallies after Brexit optimism

GBP - British Pound

Thursday saw GBP perform better than it has done in the past 3-months against its major peers. As has been the case in the past 18-months, the move was driven by political sentiment and optimistic comments from the Eurozone. Macron stated that there may be possibilities of room for manoeuvre on the withdrawal agreement however as long as it’s within the 30 day time frame given. It is now a race against time for Johnson in his cabinet.
Furthermore, sterling rallied off the back of Merkel's comments once again as she provided optimism surrounding the future of the Irish Backstop issue, which has been a key blockage in the withdrawal agreement since May began negotiations. Merkel’s comments left GBP trading at 3-week highs against USD (1.2265). It further proves that binary data is simply not enough to dictate GBP movement in the current market. Eyes turn to the G7 meetings this weekend, where Johnson has an opportunity to improve political connections between the EU and the UK.

Key Movers

Investors are avoiding buying Euros at all costs at the moment as political disarray in Italy, the possibility of a recession in Germany and the prospect of a long and aggressive easing cycle from European Central Banks means the Euro is only moving in one direction, downwards. Additionally, Trump is added further downward pressure on the European currency as trade tensions escalate and the risk of tariffs on European exports increase. With the first and third largest economies from the EU under both political and economic pressure, it is hard to see the light at the end of the tunnel for the Euro.
Meanwhile in the US, the Manufacturing PMI came in negative for the first time since 2008. This is a real kick in the teeth for president Trump as he prides himself on US economic health. There is no doubt he will use this negative data to further support his claims that the Fed aren't making decisions best suited to the future of economy. All eyes turn to the Jackson Hole conference and the G7 Meeting this weekend.

Expected Ranges

GBP/USD: 1.2130-1.2290 ▲

GBP/EUR: 1.0960-1.1105 ▲

GBP/AUD: 1.7900-1.8205 ▲

GBP/CAD: 1.6160-1.6335 ▲

GBP/NZD: 1.9005-1.9230 ▲