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GBP/USD holds above 1.22 on Brexit optimism

GBP - British Pound

GBP/USD continues to trade above 1.22 based on optimism that a no-deal Brexit can be avoided. Speaking at the G7 summit in France, UK Prime Minister, Boris Johnson again stated it was the UK's intention to leave the EU on the 31st October however he was more optimistic about a deal being struck which has supported sterling as the UK starts the week after its extended, bank holiday weekend. Last week saw GBP/USD break above 1.22 for the first time in over two weeks as encouraging comments from Angela Merkel re: Brexit saw the pound push higher. The German Chancellor stated that she wanted to see what alternatives the UK government could come with in the next month re: the Irish backstop that is so vehemently opposed by many UK MPs.

Today sees Labour leader, Jeremy Corbyn meet other political leaders to try and formulate a plan to avoid a no-deal Brexit ahead of parliament returning from its summer recess next week. GBP/USD is pushing higher currently trading at 1.2245.

Key Movers

Friday saw the US Federal Reserve Chairman, Jerome Powell make dovish comments about US monetary policy at the annual Jackson Hole Symposium. Powell reinforced market opinion that more rate cuts are coming by stating that the global economic outlook was deteriorating and was ready to "act as appropriate to sustain the expansion." The comments saw GBP/USD push towards 1.23 and EUR/USD break back above 1.11 as markets brought forward expectations of when and the amount of cuts we will see from the Fed. A September cut is full priced in and a December cut pretty much seen as a done deal too.

Yesterdays data saw US Core Durable Goods miss target whilst the overall reading (which includes car sales) beat estimates. The monthly German IFO Business Climate survey printed 94.3, its lowest level in nearly 10 years, highlighting recession fears for the EU's main engine room.

Later this week we have the second reading of Q2 GDP from the US with slight revision to 2% from 2.1% predicted. Brexit news, as usual will be the main driver for the pound.

Expected Ranges

GBP/USD: 1.2190 - 1.2290 ▲

GBP/EUR: 1.0940 - 1.11 ▲

GBP/AUD: 1.8080 - 1.8230 ▲

GBP/NZD: 1.9150 - 1.9325 ▲

GBP/CAD: 1.6160 - 1.6310 ▲