Pound rallies as EU signals agreement on Brexit divorce bill

The pound struggled for most of Tuesday, but a major piece of news just after the session ended helped Sterling rocket higher.

The pound is recording steady gains this morning. GBP/EUR is up 0.2% to €1.1297, while GBP/USD has climbed 0.4% to US$1.3415. GBP/AUD has climbed 0.6% to A$1.7683, GBP/NZD is up 0.3% to NZ$1.9422, and GBP/CAD has climbed 0.5% to C$1.7197.

Read on to see what caused the pound to decline yesterday, and what saved it at the last minute…

What’s been happening?

The Organisation for Economic Co-operation and Development (OECD) released its latest Economic Outlook yesterday, and the pound weakened on the gloomy predictions for the UK economy contained within.

While the think tank noted that global growth was picking up, it forecast that the UK economy would buck the trend and slow in 2018 and 2019.

The OECD blamed high inflation thanks to the depreciation of Sterling and uncertainty surrounding Brexit as key factors in the weakening of the UK economy.

The think tank had better things to say about the Eurozone economy, and the predictions that the currency bloc will record solid growth over the next two years saw the GBP/EUR exchange rate slowly decline.

However, news received just after the close of trading yesterday that the EU was close to agreeing a final settlement for the UK’s divorce bill sent the pound shooting higher to trend around the highs of the previous week.

The pound also saw morning losses against the US dollar, with markets confidently buying USD on the assumption that the confirmation hearing of Federal Reserve Chair nominee Jerome Powell would run smoothly.

A surprisingly large uptick in consumer confidence also helped improve appetite for the US dollar although, like against the euro, the pound was able to record sharp last-minute gains.

What’s coming up?

The pound is likely to continue feeling the benefit of the recent announcement on the UK’s divorce bill, which could keep it on the uptrend today.

UK consumer credit and mortgage applications figures are also set for release.

The euro could be volatile today on changes to the Eurozone monetary policy outlook, given that the next round of German inflation data is set for release.

Meanwhile, US third-quarter GDP figures and a public appearance from Federal Reserve Chair Janet Yellen will create plenty of turbulence for the US dollar as well.