Pound steady as Rees-Mogg ‘throws support’ behind May’s Brexit deal

The pound drifted higher on Tuesday, showing some modest gains against some of its peers amidst renewed optimism regarding Theresa May’s Brexit deal.

Trade in Sterling is mixed so far this morning, with GBP/EUR muted at €1.1712, GBP/USD stable at $1.3194 and GBP/CAD flat at C$1.7665, while GBP/AUD has risen to AU$1.8594 and GBP/NZD rocketed 1.5% to NZ$1.9368 after the RBNZ warned of possible rate cuts in the future.

Expect to see the focus remain on Brexit today as MPs hold a series of indicative votes in an attempt to find a solution to the current impasse in Parliament.

What’s been happening?

The pound ticked higher yesterday, climbing against most of its peers as prominent Brexiteer, Jacob Rees-Mogg suggested he would now back Theresa May’s withdrawal deal in order to avoid Brexit being cancelled altogether.

This was seen as a major win for the PM, on hopes Rees-Mogg’s position as the Chair of the European Research Group (ERG) could sway the influential bloc of Conservatives.

However, limiting the upside in Sterling was the subsequent report that the DUP would still not back her deal.
This didn’t stop the GBP/EUR exchange rate climbing back above €1.17 yesterday with the euro unable to hold off the pound’s advances as it was undermined by a shock fall in German consumer confidence in March.  

Meanwhile, the GBP/USD exchange rate remained largely muted throughout Tuesday’s session, with the US dollar only showing a slight wobble after US consumer confidence was reported to have fallen sharply this month.

What’s coming up?

Looking ahead, expect so see Brexit continue to dominate the conversation today as Parliament seeks to take control of the Brexit process through a series of indicative votes.

This will see MPs vote on a range of potential solutions, with the pound likely to strengthen if they back a softer Brexit or a second referendum.

Meanwhile, the euro may remain muted through the start of today’s session, following a speech by European Central Bank (ECB) President Mario Draghi in which he noted that risks to the outlook remains tilted to the downside.

Finally, the US dollar may fall back this afternoon if January’s US trade figures show that the US trade deficit remained close to the decade-high struck in December.