Pound buoyed by reports EU ready to compromise on Brexit
Philip McHugh June 26th 2020 - 2 minute read
The pound held its ground though yesterday’s trading session on hopes the EU’s willingness to compromise on Brexit could allow for a breakthrough in talks.
Sterling continues to trade in a narrow range this morning, with GBP/EUR flat at €1.1064 and GBP/USD subdued at $1.2401. GBP/CAD is muted at C$1.6929, while GBP/AUD and GBP/NZD hold steady at AU$1.8024 and NZ$1.9271 respectively.
Coming up today, the focus will be on the latest US PCE price index. Will another month of deflation see the US dollar relinquish some of its recent gains?
What’s been happening?
The Pound stabilised on Thursday, with the UK currency finding some support amidst fresh Brexit optimism.
This came on the back of reports that the EU is open to compromise on its desire for the ‘level-playing field’, a key issue that has proved to be a major roadblock in talks so far.
Meanwhile, the US dollar continued to rally on Thursday, with ongoing coronavirus jitters bolstering demand for the safe-haven ‘Greenback’ throughout the session.
The appeal of the US dollar was further boosted by positive domestic data as US durable goods orders rebounded sharply in May.
This upswing in USD put pressure on the euro yesterday, with the negative correlation between the pairing out weighing upbeat comments from the European Central Bank's (ECB) Klass Knot who suggested ‘there's now a glimmer of the beginning of a recovery’ in the Eurozone.
What’s coming up?
Looking ahead, the spotlight today looks to be on the latest PCE price index from the US.
The Federal Reserve’s preferred measure of inflation is expected to show that the US faced some deflationary pressure last month, potentially resulting in the US dollar paring some of its recent gains.
For GBP investors the focus is likely to remain on Brexit as the UK and EU prepare for the start of ‘intensified’ trade talks next week.
Finally, across the channel, EUR investors will look to a speech by ECB President Christine Lagarde for fresh impetus later today.
Written by
Philip McHugh