Pound slips back following strong weekly gains on Brexit vote drama

The pound stabilised at the end of last week’s session, consolidating its gains after putting in its best weekly performance since January following a series of tense Brexit votes throughout the session.

Sterling appears to be back on the defensive at the start of this week, with GBP/EUR dipping to €1.1706, GBP/USD muted $1.3284 and GBP/CAD stumbling to C$1.7686, while GBP/AUD and GBP/NZD both tumble, striking AU$1.8655 and NZ$1.9322 respectively.

Looking to today’s session the spotlight is likely to be on the Eurozone’s latest trade figures, with a potential trade deficit in January likely to weigh on the single currency.

What’s been happening?

The pound took a breather on Friday, stabilising against the majority of its peers after an eventful week that saw the UK currency strike new multi-month highs as the risks of a no-deal Brexit appeared to recede.

While consolidation of its recent gains likely play a part in the pause in Sterling, further movement in GBP was likely also tempered by caution over the length of any potential Brexit delay.

Meanwhile, limiting movement in the GBP/EUR exchange rate was the release of the Eurozone’s latest CPI figures, with investors failing to engage with the euro as inflation in the bloc printed in line with expectations, leaving it well below the European Central Bank’s (ECB) target rate.

Finally, leaving the GBP/USD exchange rate subdued at the end of last week’s session was the publication of the latest US industrial production figures, with a slower-than-expected recovery in factory output in February offsetting some upbeat confidence and job opening figures.

What’s coming up?

In focus at the start of this week’s session is likely to be the release of the Eurozone’s latest trade balance figures.

This could see the euro retreat this morning as economists forecast that the bloc will have registered its first trade deficit since 2017 in January.

Meanwhile, GBP investors are likely to brace for additional volatility in the pound this week as Theresa May embarks on a third attempt to get her Brexit deal through Parliament ahead of the next EU summit of leaders.

Last but not least is the US dollar, which is expected to remain subdued throughout the first half of the week as markets await the Federal Reserve’s latest policy decision on Wednesday.