Running out of steam?
The pound was caught up in another buying frenzy yesterday, spurred on by reports a draft Brexit deal was close to being signed.
GBP seems to be running out of steam this morning however, with GBP/EUR subdued at €1.1533, GBP/USD muted at $1.2746, and GBP/CAD flat at C$1.6841, while GBP/AUD and GBP/NZD are both holding steady at AU$1.8902 and NZ$2.0272 respectively.
Brexit will remain in focus as the week continues, although today’s UK CPI figures will also be of interest to GBP investors as analysts forecast another rise in inflation.
What’s been happening?
The pound enjoyed some initial gains on Tuesday thanks to positive comments from the EU’s chief Brexit negotiator. Michel Barnier told EU ministers in Luxembourg that a Brexit deal was ‘still possible this week’ but would be ‘difficult’ to achieve.
Sterling’s uptrend kicked up a notch yesterday afternoon as reports from Bloomberg suggested the UK and EU were close to reaching a draft Brexit deal.
While less dramatic than GBP, the US dollar also moved higher yesterday, with USD bulls seizing on a surprise expansion in the Empire State manufacturing index – a sign that the US economy is healthier than previously feared.
Meanwhile, the euro recorded broad losses on Tuesday as a result of rising concerns for the Eurozone’s economic outlook.
The latest ZEW economic sentiment index revealed economists are increasingly perturbed by the continuing growth slowdown.
What’s coming up?
Brexit will remain the primary catalyst of Sterling volatility today.
Traders will also be looking to the UK Consumer Price Index (CPI), with a rise in inflation last month potentially offering some modest support to the pound.
EUR investors will have the Eurozone’s own CPI figures to contend with this morning. The final reading is forecast to confirm that inflation in the bloc has slowed to a two-year low in September, leaving the euro in the doldrums.
Finally, the US dollar may face some headwinds later this afternoon, with data predicted to show US retail sales growth slowing last month.
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