Comments from Michel Barnier push exchange rates up

The week ended well for sterling seeing some of the highest trading levels in weeks against a basket of currency majors.

The pound was helped by comments from Michel Barnier, who was quoted Friday afternoon as saying some of the white papers released from the UK would be “useful”, indicating some softening to his current stance on Brexit negotiations. This added to comments earlier in the week stating the EU were ready to do a deal.

We may well see this positivity waiver if markets take on board news wires from over the weekend talking about Barniers annoyance at Dominic Raab for failing to provide details on trade between the mainland and Northern Ireland. Barnier wants to prove trade is limited so a Irish Sea border would not prove much of a problem and thus securing the border with the Irish Republic when we leave. The UK doesn’t want this of course but the backstop proposed so far has been rejected by the EU. The Irish border is one of the major sticking points to securing a trade deal and one that needs addressing urgently. Barnier has warned Raab, without a solution there will be no deal.

Although some gains have been made last week, they were limited so make no mistake, the pound is not now trending up. It’s worth taking advantage of these small spikes when they come as we can quickly see them reverse – just note last week when the UK and Germany had apparently agreed to scrap some requirements paving the way for a deal to be made easier, only for Germany to deny any such agreement. The pound went up and came straight back down again!

If we manage to hold current levels as trade in the UK begins, those with a currency transfer to make might be prudent to lock in a deal for all or hedge on a portion of your requirement sooner rather than later on a forward contract. Speak to one of the team for some friendly guidance on the benefits today.

This week we have a few key releases to contend with, including the UK and EU central bank meetings. Please note the following major releases of note:

Monday – UK industrial and manufacturing production and GDP

Tuesday – UK average earnings and unemployment figures

Wednesday – EU industrial production, Fed Beige book

Thursday – Bank of England MPC statement, minutes and policy decision. ECB statement, policy decision and press conference. Australian unemployment figures, German inflation. US inflation, Fed member speeches.

Friday – BoE Mark Carney speech, US retail sales.

As you can see, we have a full diary of important ecostats and central bank meetings this week, along with the ongoing Brexit saga and investor sentiment so plenty to add to the already volatile trading conditions. Cut all the risk by placing a forward contract today or stay in regular contact with the Currency Index team should you wish to take a gamble.