Home » Currency Note » Currency Note » Pound rallies on Brexit breakthrough

Reports that the British and German governments have decided to abandon their key Brexit demands helped the pound rally against the euro and dollar yesterday afternoon. The pound had started the day weakening against the dollar, as investors continue to be concerned about ongoing trade tensions and Brexit uncertainty. However, Bloomberg published an article in the afternoon which claimed Germany wanted to get a Brexit deal agreed and the pound promptly retraced the day’s losses and got its nose in front.

There was a two-cent swing between GBP/USD highs and lows yesterday, which goes to show just how much of an influence Brexit is having on the pound’s movements. It’s worth pointing out that Germany does not dictate the European Union’s position – and we have seen several supposed ‘Brexit breakthroughs’ fall flat soon after. But the fact remains that the eurozone’s largest economy appears to be keen to strike a deal and the news was received warmly by investors, despite the pound later falling back a little.

Other talking points from yesterday included the widening of America’s trade deficit, as imports hit a new record high and exports of soybeans and civilian aircraft fell sharply. Car sales in the UK surged by 23.1% year-on-year in August 2018 as buyers took advantage of deals in what is normally one of the quietest months of the year. The British public sure do love a bargain. The Markit service PMI beat expectations, although there were reports that Brexit uncertainty continues to stifle business-to-business spending.

Today we have construction PMI and factory orders from Germany, as well as composite and services PMI from the US. We will also see initial jobless claims up to 1 September 2018 and the employment change figures for August. There will no doubt be further reaction to the Brexit breakthrough rumours and if Michel Barnier and Theresa May strike an optimistic tone we could see some big sterling movements.

All this makes future predictions extremely difficult – which is why it’s so important that you think about managing risk if you’re sending money overseas. Do make sure to talk to your Personal Trader about how they can help, including by using a forward contract to lock in a single exchange rate. That way, you’ll know exactly what you’re paying.

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