Sterling Extends Gains on Reports of Brexit Progress

The pound extended gains yesterday, rising to two-month highs against the dollar and three-week highs against the euro. US and euro data are in focus.

Previous Day's Market Highlights

The pound extended gains yesterday, rising to a three-week high against the euro and a two-month high against the dollar. Sterling-euro traded above 1.1300 and sterling-dollarbroke above 1.3400. Signs of progress continued to support sterling following Tuesday’s reports that of an agreement over the divorce bill and additional reports that the UK may be nearing a deal on the Irish border.
 
These gains saw sterling hit its highest levels since June against the Canadian dollar, since last September—and in turn around the highest since the EU referendum—against the Aussie dollar, and since the EU Referendum against the kiwi dollar. The kiwi fell further on a drop in business confidence.
 
Despite the signs of progress, Brexit negotiations remain a downside risk to the pound given significant remaining uncertainties, and signs of contention could again weaken sterling.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1341 1.1406 1.1092 2.75%
GBP / USD 1.3456 1.3481 1.3039 3.28%
EUR / USD 1.1864 1.1961 1.1553 3.41%
GBP/AUD 1.7755 1.7772 1.6894 4.94%
GBP / NZD 1.9665 1.9699 1.8787 4.63%
GBP / CAD 1.7330 1.7342 1.6589 4.34%

Today's Market Highlights

In the morning, the euro will be in focus, with the Unemployment Rate forecast to hold below 9% and Core CPI to pick back up above 1.0% (10:00 GMT). These gains could strengthen the euro as a stronger economy and signs of rising inflation support the argument for normalising monetary policy, although inflation remains below target.
 
PCEincome, and spending figures are the main releases this afternoon (13:30 GMT). Gains could strengthen the dollar but may have limited impact barring any surprises. Other US releases include weekly Initial Jobless Claims, forecast to remain broadly unchanged if a touch higher, and the Chicago Purchasing Managers’ Index, forecast to slow (13:30, 14:45 GMT).
 
As for the pound, it will be closely watched for whether it can further extend gains or sees a pullback. Politics will also remain in focus: in the UK, should there be any additional Brexit headlines, and in the US should there be any developments in tensions with North Korea or in the Senate’s tax bill debate.

Today's Economic Calendar

Time Currency Release Consensus Previous
10:00 EUR Eurozone Unemployment Rate (Oct) 8.9% 8.9%
10:00 EUR Preliminary CPI YoY (Nov) 1.6% 1.4%
10:00 EUR Preliminary Core CPI YoY (Nov) 1.1% 0.9%
10:00 EUR ECB's Praet Speaks
USD OPEC Meeting
13:30 USD Personal Spending (Oct) 0.3% 1.0%
13:30 USD Personal Income MoM (Oct) 0.3% 0.4%
13:30 USD Personal Consumption Expenditure - Price Index YoY (Oct) 1.5% 1.6%
13:30 USD Core PCE - Price Index YoY (Oct) 1.4% 1.3%
13:30 USD Initial Jobless Claims (24 Nov) 240K 239K
13:30 CAD Current Account (Q3) -19.50B -16.32B
14:45 USD Chicago Purchasing Managers' Index (Nov) 63.0 66.2
18:00 USD Fed Member Kaplan Speaks
AUD HIA New Home Sales MoM (Oct) -6.1%
01:45 CNY Caixin Manufacturing PMI (Nov) 50.9 51.0