GBP Rallies on Transition Agreement

Sterling rallied across the board on Brexit transition deal progress. February CPI is in focus today.

Previous Day's Market Highlights

Yesterday morning saw some excitement for sterling as reports broke that a transition period had been agreed ahead of this week’s EU Summit. The development was a boon for the pound, which rallied above 1.14 against the euro to nearly six-week highs. Sterling-euro has struggled to break out of its 1.12 to 1.14 range and yesterday’s gains were capped below 8th February highs around 1.1450, before the pound fell back below 1.14.
 
Against the dollar, sterling regained 1.40 for the first time since 26 February. The dollar was softer against the euro as well, which saw euro-dollar back up above 1.23. Sterling-Aussie and sterling-Canadian dollar hit new highs since the referendum, while sterling-kiwi hit its highest levels since December.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1378 1.1435 1.1150 2.49%
GBP/USD 1.4051 1.4089 1.3711 2.68%
EUR/USD 1.2349 1.2447 1.2154 2.35%
GBP/AUD 1.8247 1.8285 1.7599 3.75%
GBP/NZD 1.9453 1.9531 1.8904 3.21%
GBP/CAD 1.8362 1.8417 1.7547 4.72%

Today's Market Highlights

There are further risks for the pound this week. Today kicks off the first of the macroeconomic indicators, with CPI projected to slip back from 3.0% to 2.8% (09:30 GMT). Any greater fall could weigh on the pound. Political headlines will remain in focus, while markets are also anticipating the latest BoE guidance. If relatively hawkish, the good news for the pound could continue, although uncertainties and risks remain, particularly around Brexit.
 
Expected softer Economic Sentiment (10:00 GMT) and Consumer Confidence (15:00 GMT) figures will likely do little to support the euro.
 
Tomorrow, the Fed is expected to announce a 25 basis-point rate hike, which has been largely priced in. The dollar will react to the overall tone of the guidance, with an upbeat economic outlook or more hawkish tone likely to strengthen the greenback, while any disappointment of market expectations would instead pose a downside risk.

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP CPI YoY (Feb) 2.8% 3.0%
09:30 GBP Core CPI YoY (Feb) 2.5% 2.7%
09:30 GBP RPI YoY (Feb) 3.7% 4.0%
10:00 EUR German ZEW Survey - Economic Sentiment (Mar) 13.0 17.8
10:00 EUR Eurozone ZEW Survey - Economic Sentiment (Mar) 28.1 29.3
NZD Global Dairy Trade Price Index -0.6%
15:00 EUR Preliminary Consumer Confidence (Mar) 0.0 0.1

Caxton