Pound exchange rates strengthen as soft Brexit hopes grow

The pound punched higher on Tuesday as Theresa May’s decision to take personal control of Brexit negotiations helped to fuel speculation that the PM will pursue a ‘soft’ Brexit.

Sterling appears to be consolidating these gains this morning, with GBP/EUR stable at €1.1261, and GBP/USD edging higher at $1.3167, while GBP/CAD and GBP/NZD hold steady at C$1.7310 and NZ$1.9353 respectively. Only one pairing is really showing any real movement so far today as GBP/AUD soars to AU$1.7791.

Looking ahead, Germany will publish its latest business climate reading this morning, with the euro potentially sliding if sentiment is shown to have fallen in July as expected.

What’s been happening?

The pound ticked higher against most of its peers on Tuesday as markets reacted to the announcement that Theresa May would be taking personal control of EU Brexit negotiations.

Informing Parliament about the decision yesterday, the new Brexit Secretary Dominic Raab said he would now be ‘deputising’ the PM in talks with the EU.

The move was seen as broadly Sterling positive, fueling hopes that the PM will look to distance negotiations from Brexiteers in her party and opt for a ‘softer’ Brexit.

The GBP/EUR exchange rate edged higher during yesterday’s session, with the euro offering little resistance against the pound’s advances in the wake of the Eurozone’s latest PMI report.

The single currency was left on the back foot as the bloc’s latest PMI estimate revealed that private sector growth slowed this month, with business optimism being particularly weakened by rising trade war fears.

Meanwhile the GBP/USD exchange rate clambered to a new one-week high on Tuesday, with the US dollar coming under pressure as the International Monetary Fund (IMF) suggested in its latest annual External Sector Report that the currency is overvalued.

The remarks are likely to be welcomed by Donald Trump, who recently complained that the strength of the dollar is undermining US growth.

What’s coming up?

Looking ahead, the Confederation of British Industry (CBI) will publish its latest Distributive Trades index this morning.

This could cause the pound to tumble as economists forecast the index will reveal domestic retail sales activity slowed in July.

Meanwhile the euro is also poised to slide today with the release of Germany’s latest business Climate figures, as analysts predict sentiment will have continued to tumble in July.

Finally the US dollar could face downside pressure this afternoon with the release of the latest US housing figures, with an expected drop in New Homes Sales likely weakening USD exchange rates.