GBP/EUR strikes one-week high amidst fresh Brexit optimism
Philip McHugh September 28th 2020 - 2 minute read
The pound rallied on Friday as the UK government reaffirmed its commitment to reaching a post-Brexit trade deal with the EU.
Sterling looks to extend these gains at the start of this week, with GBP/EUR jumping to €1.1003 and GBP/USD climbing to $1.2788. GBP/CAD is buoyed at C$1.7130, while GBP/AUD and GBP/NZD are holding steady at AU$1.8152 and NZ$1.9526, respectively.
Looking ahead, the focus for the start of this week’s session will be a speech by European Central Bank (ECB) President Christine Lagarde
What’s been happening?
The pound edged higher at the end of last week’s session, buoyed by some cautious optimism regarding Brexit.
Sterling’s gains followed comments from a Downing Street spokesperson, who suggested that the UK government is still striving to reach a deal with the EU, and working closely with the EU in regard to the Northern Ireland protocol of the Withdrawal Agreement.
The US dollar’s gains were more pronounced on Friday, with coronavirus concerns continuing to underpin demand for the safe-haven currency.
These safe-haven flows also helped to offset some underwhelming US data, with domestic durable goods orders rising at a slower pace than expected in August.
The euro, meanwhile, found itself on the defensive again on Friday, with Europe’s coronavirus woes reflecting poorly on the single currency.
What’s coming up?
Kicking off this week’s session will be ECB President Christine Lagarde’s introductory statement at the ECON committee of the European Parliament.
Lagarde’s remarks will be under close scrutiny by EUR investors, who will be looking for any hints on how Europe’s coronavirus resurgence could influence the ECB’s monetary policy going forward.
For GBP investors, Brexit will be centre stage this week as formal UK-EU trade negotiations resume on Tuesday.
In the meantime, Cabinet Office minister Michael Gove will meet with European Commission Vice President Maros Sefcovic later today to discuss the implementation of the Brexit divorce deal, with any signs of tensions here likely to weigh on the pound.
Also in focus at the start of this week will be the first US presidential debate on Tuesday.
This is likely to put the US Presidential election firmly back in the spotlight for USD investors, and could inject some fresh volatility into the US dollar.