GBP consolidates gains despite strong Eurozone and US data

The pound rocketed higher yesterday as markets continued to react positively to news of a potential Brexit divorce bill settlement.

Sterling is extending gains this morning. GBP/EUR has risen 0.3% to €1.1349, while GBP/USD is up 0.4% to US$1.3466. GBP/AUD has risen 0.2% to A$1.7777, GBP/NZD has shot up 1% to NZ$1.9690, and GBP/CAD is up 0.5% to C$1.7351.

It wasn’t all plain sailing yesterday. Read on to see what high-profile Eurozone and US data slowed the pound’s advance…

What’s been happening?

The pound surged yesterday after it emerged that the United Kingdom and European Union are close to agreeing on a final sum for the Brexit divorce bill.

The issue of how much the UK is obligated to pay to cover the costs of Brexit and its pre-existing financial commitments has been hotly debated, with talks having been stalled for months as neither party refused to budge from their positions.

However, with time running out to satisfy the EU’s demands and allow trade negotiations to begin in December, the UK seems ready to agree to a final settlement in the region of £50 billion.

Hope that this would be sufficient to break the deadlock and get talks back on track caused markets to rush back into the pound.

While GBP/EUR did end the session higher, its advance was met with some resistance after better-than-expected German consumer price data was released for October.

As well as the predicted 0.3% price growth recorded on the month, year-on-year price growth clocked in at 1.8% rather than 1.7% as expected.

GBP/USD has a harder time, and after choppy trading ended the day back around where it started thanks to above forecast third quarter US GDP figures.

The economy expanded 3.3% year-on-year in the third quarter, slightly beating economists’ forecasts, and marking the first time since 2014 the US economy has grown faster than 3% for two successive quarters.

What’s coming up?

The most influential UK data today has already been released, but despite a larger-than-expected drop in UK consumer confidence the pound is continuing to rise.

This suggests that yesterday’s news regarding the Brexit divorce bill will continue to push the pound higher throughout the day.

Promising results from the upcoming German unemployment figures and Eurozone consumer price index, however, could slow or reverse any gains for GBP/EUR.

Similarly, the US personal consumption expenditure figure could create volatility for GBP/USD, as a good number here will increase further the odds of the Federal Reserve hiking interest rates not only next month, but also again in 2018.