Pound exchange rates jump as declaration of future UK-EU relationship agreed

The pound shot up against the majority of its peers yesterday as markets cheered the news that draft text on the future relationship between the UK and EU has been agreed.

Sterling appears to have lost its momentum this morning however, with GBP/EUR muted at €1.1269, GBP/USD subdued at $1.2861 and GBP/CAD steady at C$1.6969, while GBP/AUD and GBP/NZD remain flat at AU$1.7739 and NZ$1.8876 respectively.

Outside of further Brexit developments the main focus for investors today will be on the Eurozone’s latest PMI figures, with the euro likely to slide if the bloc’s private sector growth continues to slow as forecast.

What’s been happening?   
                                                   
The pound soared higher in trade on Thursday, with GBP investors relieved to hear that a political declaration outlining the future relationship between the UK and EU had been ‘agreed in principle’.

The declaration covers how various issues such as trade and security will be handled between the UK and EU post-Brexit, but most importantly paves the way for EU leaders to approve both the declaration and the draft withdrawal deal at an extraordinary EU summit this weekend.

This optimism saw the GBP/USD exchange rate climb as much as 1% in the immediate wake of the news, with the US dollar unable to put up much of a fight as a ‘Thanksgiving pause’ in US markets led to thin trading volumes in the US currency.

Meanwhile aiding the rally in the GBP/EUR exchange rate was the publication of the Eurozone’s latest consumer confidence index, which revealed household sentiment fell to its weakest levels in over a year in November.

What’s coming up?

Looking ahead, a lull in notable UK economic data will leave Brexit as the most pressing concern for GBP investors through to the end of the week.

This will likely result in the pound remaining buoyed so long as no hiccups emerge between now and Sunday’s EU summit.

Meanwhile the euro is likely to weaken this morning with the publication of the Eurozone’s latest PMI readings, with another expected slowdown in the bloc’s private sector likely to raise further concerns regarding the Eurozone’s growth potential in the fourth quarter.

Finally the US dollar may remain in limbo today as trading volumes remain thin with many US traders enjoying a four-day Thanksgiving weekend.