Pound exchange rates rally as Raab optimistic Brexit deal can still be agreed
Philip McHugh September 25th 2018 - 2 minute read
The pound looked to mount a recovery at the start of this week’s session, with Brexit secretary Dominic Raab’s optimism on the chances of a Brexit deal still being agreed reassuring some investors following last week’s strong jitters.
Following on from yesterday’s rally Sterling looks to start today’s session a little more subdued, with GBP/EUR stable at €1.1147, GBP/USD flat at $1.3104 and GBP/CAD muted at C$1.6980, while both GBP/AUD and GBP/NZD are holding steady at AU$1.8076 and NZ$1.9712 respectively.
Looking ahead, Brexit may take a back seat today, with the Bank of England’s (BoE) Gertjan Vlieghe likely to offer a few hints on the bank’s policy outlook.
What’s been happening?
It appears the pound’s recent rollercoaster ride isn’t over just yet as the currency bounced back from Friday’s dramatic losses yesterday, following comments from Brexit secretary Dominic Raab.
Speaking to Talk Radio Raab expressed confidence that despite recent setbacks – such as the rejection of Theresa May’s Chequers plans on Friday – the UK and EU will still be able to reach an agreement on Brexit.
The rebound in the GBP/USD exchange rate was further extended yesterday by broad weakness in the US dollar, with the pairing briefly rising as much as 0.7% amid limited demand for USD ahead of Wednesday’s rate decision from the Federal Reserve.
Meanwhile after initially strengthening throughout the first half of the session, the GBP/EUR exchange rate retreated close to its opening levels following comments by European Central Bank President Mario Draghi.
Speaking in Brussels, Draghi struck an optimistic tone as he suggested underlying inflation is expected to continue to build in the comings months, while a tightening labour market would help to bolster wage growth.
What’s coming up?
Barring any other major Brexit developments movement in the pound on Tuesday may be driven by a speech from Gertjan Vlieghe, with the currency potentially strengthening if the recent upswing in inflation leads to a hawkish outlook from the BoE policymaker.
Meanwhile following on from this morning’s French business confidence figures, the euro may find itself on the defensive as business sentiment was revealed to have fallen to a 17-month low this month.
Finally the US dollar may continue to tread water today as markets await the Federal Reserve’s rate decision tomorrow, with investors likely to see little upside to USD having priced in a rate hike from the bank some months ago.