Sterling gapped higher this morning as Asian markets reacted positively to the news of UK Prime Minister, Theresa May’s cabinet agreeing to her plan for a future trading relationship with the EU after Brexit. The agreement sees an avoiding of a hard Irish border as the UK would levy EU taxes on its behalf, would end the free movement of people and end the European Court of Justice’s input in UK affairs. The agreement overall has been seen as towards the softer end of the Brexit scale with hardliners not happy at some of its proposals. The main fallout from the agreed common position is that Brexit Secretary, David Davis has resigned stating in his resignation letter that “the national interest requires of a Secretary of State in my Department that is an enthusiastic believer in your approach, and not merely a reluctant conscript.” A white paper is due later this week outlining the full approach the government will take and it appears holders of sterling like the soft-Brexit plan however not the political ructions it has caused internally within the Conservative party. After moving higher cable fell back on the news re: David Davis. The response to the plan from the EU will be closely monitored so it could be a very volatile week for the pound.
Away from Brexit politics we have the first official monthly print for GDP being released by the ONS tomorrow, there will still be quarterly prints like before however we will now get a monthly update of the month before lasts estimated performance (this release will give a prelim reading for May). We also have Manufacturing Production figures tomorrow and a speech by Bank of England Governor, Mark Carney on Wednesday. GBP/USD is heading north having moved above 1.3350 as London came online.