The pound continued its journey higher yesterday as Theresa May enforced the concept of a potential delay to proceedings. The prime minister confirmed such a scenario was only likely to be for a couple of months, essentially ending the extension before the Summer European Parliament elections. The prime minister presented her plans in front of the House of Commons yesterday which will add another layer of complexity when attempting to decide what happens across these next few weeks.
The pound has been lapping up the new dynamic in Brexit negotiations, one where Corbyn now backs a 2nd referendum and May takes a complete U-turn and accepts the prospect of an extension – maybe she’s taking tips from the Federal Reserve?! Either way, the recent news has pushed the pound to multi-month highs against a host of currencies with the stand out pair being GBPEUR. The pair has pushed past significant long-term resistance, as participants speculate the outlook for the pound is healthier than the euro. With Italy in recession and Germany avoiding a technical one by the skin of its teeth, this new Brexit rhetoric has offered an element of comfort to sterling bulls. The pound also has risen to very respectable levels against the mighty greenback, reaching just shy of the $1.33 level. Uncertainty is still rife so there are many institutions and banks calling time on this swift GBP momentum move. Just how quickly steam runs out will be the key question.
Today’s focus will mainly be on US data and events, with Jay Powell offering his second round of testimony. Nothing special came from his first appearance. The Fed chief simply confirmed the heavy use of the word ‘patient’, coming out of the central bank’s stables means they are taking a pause while defining an updated view on the health of the economy.
Written by Viv Savani. 8:05am, February 27th 2019
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