Pound stabilises ahead of busy news week

Pound stabilises ahead of busy news week

The pound held steady against many of the other majors on Friday despite investors fearing that disagreements over the Irish border could become a major roadblock in Brexit negotiations.

GBP/EUR is currently trading in the region of €1.1359, GBP/USD is hovering around US$1.3935, GBP/AUD is up 0.2% at AU$1.8109, GBP/NZD is holding at NZ$1.9350 and GBP/CAD is flat at C$1.8281.

While there isn’t much happening in the currency markets today, it could prove to be the quiet before the storm…

What’s been happening?

The pound looked to move higher against the majority of its peers on Friday following a broad based recovery by the currency on Thursday.

However, Sterling’s advance quickly hit a glass ceiling as concerns were raised over the possibility of a deadlock over the issue of a post-Brexit Irish border derailing negotiations with the EU.

The GBP/EUR exchange rate was able to continue to build on Thursday’s gains at the end of last week’s session as Eurozone inflation was revised down further than expected in February’s final CPI reading.

With inflation falling to its lowest levels since December 2016, it appears that the European Central Bank (ECB) may be vindicated in maintaining its dovish stance earlier this month and will likely further dent hopes that a rate hike could be possible sometime later this year.

The GBP/USD exchange rate also looked to end the week on a high as investors reacted to reports that Trump was planning to replace his national security advisor H.R. McMaster, in a move that critics feared could escalate trade tensions.

However the US dollar was able to mount a notable recovery later in the afternoon as the University of Michigan reported that US consumer sentiment soared to a new 14-year high this month.

What’s coming up?

It’s set to be a fairly quiet start to the session this week, with investors possibly taking this brief lull to reflect on what is likely to be an eventful week for the currency market.

The coming week is likely to be particularly impactful for the pound with the release of the UK’s latest inflation figures, employment statistics and the Bank of England’s March rate decision. The week will then being capped off with an EU summit on Brexit.

In terms of USD, markets are likely to begin gearing up for an expected rate hike from the Federal Reserve on Wednesday, which may help to support the US dollar throughout the week.

Meanwhile the Eurozone will publish its latest PMI figures in the second half of this week, with the euro likely to slide if an expected slowdown in growth appears to support recent speculation that momentum in the bloc is easing.