The Pound spiked upward against all major currency pairs yesterday, after news broke that there has been a breakthrough regarding the UK and EU’s Brexit transitional negotiations.
The legal text has now been agreed and although there are still some unresolved issues such as the Northern Irish border issue along with issues surrounding UK fishing waters which has already been commented on by a number of MP’s.
The breakthrough is a positive for the Pound and its resulted in the currency trading at some of the best levels in over 18 -months against the likes of the Aussie Dollar and the Canadian Dollar.
The Pound to Euro rate has been a bit more stubborn but I think that with wage growth picking up along with the Bank of England now likely to hike interest rates this year I do think that there’s a chance the Pound could trade at a higher level vs the Euro later in the year.
Those of our readers hoping for a stronger Pound should follow wage growth closely as so far, it’s lagged inflation levels reducing the spending power of the average UK household. Should this pick up I do expect to see the Pound climb and yesterday’s news of wages growing at the fastest rate since 2009 could be a turning point.
What data releases could result in further movement for GBP exchange rates?
Tomorrow morning there will be the release of UK unemployment data which is another area the BoE will be watching closely before making any further monetary policy decisions. This is another potential market mover and I also think that those watching the GBP to EUR rate should be aware of the Italian politics issues and how a potential coalition between the parties could also move the markets.
The EU summit in Brussels will start this Thursday and we expect the Brexit to be in focus once again, so expect any comments from key personnel to result in further movement for GBP exchange rates.
Towards the end of next week UK GDP will be released which will give us an idea as to the health of the UK economy. With so much data set for release and the Brexit transitional agreement just agreed I’m expecting the next week to be very busy for the Pound.