GBP/USD sails past $1.31 as Brexit trade deal ‘within reach’

The pound rocketed on Wednesday, striking a new six-week high against the US dollar amidst renewed hopes for a UK-EU Brexit trade deal.
 
Sterling is consolidating these gains this morning, with GBP/EUR stable at €1.1084 and GBP/USD flat at $1.3126. GBP/CAD is rangebound at C$1.7280, while GBP/AUD and GBP/NZD hold steady at AU$1.8490 and NZ$1.9720, respectively.
 
Coming up today, we may see Brexit take a backseat as we await a speech by Bank of England (BoE) Governor Andrew Bailey later this morning.
 

What’s been happening?

The pound stormed higher through yesterday’s trading session in response to fresh optimism for a post-Brexit trade deal between the UK and EU.
 
This optimism came on the back of comments made by EU chief negotiator Michel Barnier in European Parliament in which he suggested a deal is ‘within reach’, while also extending an olive branch to Boris Johnson with his suggestion that the EU is ‘ready to discuss all subjects on basis of legal text’.
 
Additional support for Sterling came in the form of Bank of England (BoE) Deputy Governor Sir Dave Ramsden, who poured more cold water on negative interest rate speculation.
 
At the same time, the US dollar selling bias remained firmly in place on Wednesday as hopes for a US stimulus package being agreed before the US election continued to bolster market sentiment at the expense of the safe-haven ‘Greenback’.
 
This offered the opportunity for the euro to extend its gains into another day as the single currency’s negative correlation with the US dollar allowed it to firm in spite of lingering concerns over Europe’s coronavirus resurgence.
 

What’s coming up?

Looking ahead, the focus through the first half of today’s session will be on a speech by BoE Governor Andrew Bailey.
 
Like Ramsden, Bailey is also likely to play down the prospect of negative interest rates, but his speech could still see investors cool on the pound if he strikes a more cautious tone in light of the economic risks posed by the UK’s coronavirus resurgence and the threat of stricter restrictions.
 
Meanwhile, the focus for USD investors will be last week’s US initial jobless claims. Will another jump in claims stoke concerns the US labour market is slowing and put additional pressure on the US dollar this afternoon?
 
Closing out today’s session we have the publication of the Eurozone’s latest consumer sentiment, where a deterioration in household confidence as a result of the coronavirus resurgence could weigh on the euro.