Pound edges higher on Brexit impact reports

Pound edges higher on Brexit impact reports

An almost universally quiet day in terms of data yesterday left the major currencies on sluggish form, although the pound was able to make some gains versus the euro.

The pound started Tuesday by edging higher. GBP/EUR has risen to €1.1202, while GBP/USD is just on the positive side of opening levels at US$1.3328. GBP/AUD has posted a 0.2% rise to hit AU$1.7534, with similar gains for GBP/CAD taking the pairing to C$1.7017. GBP/NZD isn’t faring quite as well, and is stuck around opening levels at NZ$1.9242.

Read on to find out why the pound was able to hold gains versus the euro yesterday, despite what should have been euro-boosting news…

What’s been happening?

The pound was able to advance steadily against the euro yesterday, although initial GBP gains against against the US dollar faded away by the close of trading.

The general dearth of economic data meant that the major currencies were left directionless.

One fact that excited markets yesterday was the admission by a government spokesperson that Downing Street would comply with the recent Parliamentary vote demanding the release of 50+ analyses into the impact of Brexit upon the UK economy.

Ever since the referendum, the government has battled accusations that it is operating opaquely with regards to Brexit, having failed to satisfy the numerous demands for clarity in the past.

The Brexit impact reports could therefore provide business leaders and markets with the kind of information they have long been looking for, which could boost Sterling as the private sector will be able to better prepare for a split from the EU, while markets will have more information with which to accurately value Sterling.

GBP/EUR was also able to hold gains despite news that German Chancellor Angela Merkel may be able to convince Germany’s Social Democratic Party (SDP) to form another ‘grand coalition’ – something Germany’s largest opposition party had previously ruled out after having made a government with Merkel twice previously.
Although a hopeful sign from the point of view of avoiding political instability, it seemed that markets weren’t ready to count their chickens just yet, so the euro remained on the decline.

Meanwhile, strong US home sales figures for October were enough to reverse the GBP/USD gains seen earlier in the day.

Economists had expected home sales to decline -6.1%, but transactions continued to grow 6.2% after the 14.2% growth recorded in September.

What’s coming up?

Things pick up today in terms of data and developments.

The OECD Economic Outlook will be released shortly, and the euro could rise if the report indicates that the currency bloc’s current strong rate of growth is set to continue.

Meanwhile the US dollar has the October advanced goods trade balance, the November consumer confidence index, and a testimony from soon-to-be Federal Reserve Chair Jerome Powell at his confirmation hearing before the Senate Banking committee.