GBP/USD firms as EU to grant extension to Northern Ireland protocol

The pound traded with modest gains on Wednesday, bolstered by fresh Brexit optimism.

However, Sterling is struggling for momentum so far this morning, with GBP/EUR muted at €1.1695 and GBP/USD flat at $1.3963. GBP/CAD is rangebound at C$1.7171, while GBP/AUD and GBP/NZD retreat to AU$1.8413 and NZ$1.9771 respectively.

Coming up, the spotlight today will undoubtedly be on the Bank of England’s (BoE) latest rate decision.
 

What’s been happening?

The pound initially trended lower yesterday, with the currency coming under some modest pressure as the UK’s latest services PMI printed short of expectations.

However, Sterling rebounded in the second half of the European trading session, following reports that EU member states have informally agreed to offer a three-month extension to the chilled meats grace period of the Northern Ireland protocol.

Meanwhile, the euro was buoyed on Wednesday by the release of the Eurozone’s own PMI figures, after they reported business activity in the bloc struck a 15-year high this month.

At the same time, the US dollar fell back yesterday, with the currency being undermined by improved risk appetite and some underwhelming US PMI figures.
 

What’s coming up?

Centre stage today will be the Bank of England’s latest interest rate decision.

No policy changes are expected from the BoE this month, but GBP investors will be keeping a close eye on the bank’s forward guidance.

This could see the pound soar this afternoon, if recent upbeat commentary from BoE policymakers is reflected in more hawkish policy guidance from the bank, particularly if there is any mention of potential tapering of bond purchases in the future.

For USD investors the focus will be on the latest US durable goods order figures, with the US dollar likely to strengthen if May’s figures report a strong rebound in order growth as expected.

In the meantime, the euro could receive a boost this morning as Germany’s latest IFO business climate survey is forecast to report another rise in domestic business morale this month.