Publication of joint Brexit treaty boosts Pound

The pound was sent racing higher yesterday by the unveiling of a surprise Brexit document penned jointly by the UK and EU.

The pound remains on solid form this morning. The GBP/EUR exchange rate has risen 0.2% to €1.1387, while GBP/USD has risen 0.3% to US$1.4061. GBP/AUD is up 0.4% to AU$1.8257, GBP/NZD is up 0.6% to NZ$1.9473, and GBP/CAD has risen 0.2% to C$1.8376.

Read on to find out more about the latest Brexit development and its impact upon Sterling yesterday…

What’s been happening?

The publication of a joint UK-EU Brexit treaty yesterday saw the pound surge higher versus the euro and US dollar.

In an unexpected sign that solid progress was being made in the Brexit negotiations, the two parties unveiled the first draft of an agreement which outlined the terms of citizens’ rights, the financial settlement and the duration of the transitional period, amongst other issues.

Sterling gained nearly one cent against the euro, while GBP/USD climbed by one-and-a-half-cents, as markets reacted positively to the dwindling prospect of the UK crashing out of the EU with no deal in place when the Brexit deadline of March 2019 arrives.

The fact that not all the issues have been resolved, and that leading Brexiteers are not all happy with the terms set out in the arrangement, dragged GBP/EUR down from its highs yesterday, but the pairing still remained solidly above opening levels at the close of trade.

The moderate recovery for the euro was spurred by comments from European Central Bank (ECB) official Yves Mersch, who said that he believed all the prerequisites for Eurozone inflation to rise were present.

A combination of building anticipation for the Federal Reserve’s latest interest rate decision, coupled with fears over a trade war between the US and China, kept the US dollar on soft form.

What’s coming up?

UK consumer price data for February is set for release this morning and is expected to show a slowdown in both overall and core price growth.

This could soften the odds that the Bank of England (BoE) will need to act to curb inflation, suggesting an interest rate hike may not be on the cards for the policy meeting in May, which would weaken the pound.

The Eurozone’s ZEW current situation, expectations, and economic sentiment survey results, as well as the latest Eurozone consumer confidence index, will give EUR investors plenty to think about today.

Meanwhile, a combination of no economic data from the US and the fact that the latest Federal Reserve policy meeting concludes tomorrow evening is likely to keep USD on soft form today.