The pound fell against its counterparts on Thursday as Brexit optimism fades. The premise for this week’s rally in GBP is based upon the idea that a no-deal scenario is virtually out of the question. However, is this really the case?
This week’s revelation that Jeremy Corbyn will now potentially back a 2nd referendum mixed with prime minister May’s almighty U-turn on extending Article 50 has allowed the recently wilting currency to flourish. The Great British Pound reached some of its best levels on a multi-month basis against a basket of currencies, with the GBPEUR pair standing out after hitting the €1.1720 level on Wednesday. However, the back end of this week has seen some of this optimism fade. Yes, Article 50 can be extended and, yes, Corbyn can back a 2nd referendum, but what does this actually change?!
Firstly, will allowing a few extra months mean the European Union will finally reopen the withdrawal agreement and suddenly offer PM May the exact legal text she requires to secure enough votes in Parliament? Almost 99.9% no! Secondly, even though Jeremy has finally had his hands tied behind his back and forced into backing a 2nd referendum, how likely is there to be one? Very unlikely. There’s a good case that we’re only delaying the inevitable. Sterling lost around 0.60% against the greenback and single currency. What will Friday’s trade have to offer?
On the data front we have a number of European PMI releases this morning, including manufacturing numbers from the UK. Eurozone inflation will be closely watched as well as Canadian GDP figures. We’ll also have a set of US data to keep things interesting in the afternoon session.
Have a great weekend.
Written by Viv Savani. 8:40am, March 1st 2019
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