The Pound is set for a volatile end to this week with the eagerly awaited EU summit taking place this Thursday and Friday. The Pound is likely to see considerable volatility as the summit concludes on whether Britain can move on to the next phase of negotiations which will cover the issue of future trade. The EU chief negotiator Michel Barnier has negotiated a deal that he will put forward to the other 27 EU leaders who will then decide on whether sufficient progress has been made. It would only take one member to veto the proposal which could cause problems for the Pound, although the mood since last Friday has been largely upbeat.
A positive mood with both sides keen to move forward, which includes some sort formal commitment, should help see the Pound rally. A move towards 1.15 for GBP/EUR and 1.35 for GBP/USD seems to be a feasible outcome.
UK Inflation rate rises
UK inflation data released this morning is creating additional volatility for the Pound, with the inflation rate having climbed to 3.1%. UK inflation recently hit 3% which is at the higher end of where it should be. The move higher has seen some small additional gains for the price of Sterling. It is worth highlighting that the Bank of England has suggested there should be some bigger spikes in the New Year which could in turn lead the central bank to a more hawkish outlook on future interest rate hikes.
Meanwhile, British politics continues to be the big driver for the price of the Pound and an amendment to change the terms of Brexit and keep Britain in the single market will be put forward by the Liberal Democrats today. The move is more likely aimed to flush out the Labour party which is sitting on the fence in terms of Brexit policy and whether or not to leave the single market. Any political Brexit developments will only create additional volatility for the Pound.