GBP’s value increased throughout much of Tuesday’s trading, with the pound breaking back above 1.16 & 1.30 against the EUR & USD respectively.

Currency Pair% Change (Month)Difference on £200,000
GBPEUR1.4%€3,400
GBPUSD2.4%$5,220
GBPAUD2.1%AUD $8,020

Whilst both of these thresholds provided the pound with plenty of resistance early on, they were both surpassed by early afternoon's trading.

It seems as though investors may have been buoyed by various reports that cross-party Brexit talks had been “productive”. These seemed to act as a catalyst for the pound’s upturn, which saw its improvements mirrored against the AUD. The pound made gains of over two cents against its AUD counterpart, with GBP/AUD rates moving back above 1.85 by the close of European trading. 

Whilst investors return to GBP, and the subsequent strengthening of the pound sparked a reversal of the recent negative trend, investors will now be trying to decipher whether the current spike is actually sustainable.

Based on how docile the markets have been over the past month, it is certainly conceivable to think that some sort of that tangible evidence may well be required, if GBP is going to sustain any major improvements, up from its current levels.

It would certainly not be a surprise if investors remained somewhat sceptical about any prospective progress, based on our Brexit history to date, which has included numerous false dawns.

UK government remain keen to agree Brexit deal ahead of European elections on May 23rd

UK government remain keen to agree Brexit deal ahead of May 23rd

Despite this growing lack of confidence in the Government (recent polls have indicated that the public’s faith in the Government’s ability to negotiate a viable Brexit is at an all-time low), the PM’s de facto deputy yesterday reiterated the Governments apparent understanding of the “need to inject urgency” into talks.

With Theresa May keen to try and push through a Brexit deal before the European elections, which are now under a month away, the next few weeks could be key in determining whether or not a Brexit deal is achievable in the relative short-term. 

Whilst the outcome of Brexit is likely to have a significant impact on the pound’s value in the longer-term, any failure to agree a deal by May 23rd could also bring with it negative ramifications for GBP.

Clients looking at this week’s economic data will be paying close attention to tomorrow’s Bank of England (BoE) interest rate decision and subsequent monetary policy statement. The predicted result is for interest rates to be kept on hold, but it is BoE governor Mark Carney’s speech, which is likely to be of particular interest to analysts.

Carney has been one of Brexit loudest protagonists and if he continues with his recent themes, he is likely to talk down any interest rate hikes by the BoE for the foreseeable future, while the uncertainty over Brexit remains.

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