Sterling has hit some better ground on the back of news from the EU Parliament that perhaps the UK will be able to attain access to the single market once Brexit goes through.
As is so often the case with exchange rates, the market has moved higher on the back of the speculation over the final deal the UK will ultimately get, might not be as bad as many have predicted. The final deal the UK gets will be key to the relative strength or weakness for the Pound, the prospect of continued access to the single market will be very good news for the Pound. Essentially the UK relies heavily on trade with the EU and continued access to this important market place will be vital to the success of Brexit.
The type of access the UK will achieve has been a growing concern for all sides in this negotiation. Expectations for the Pound are absolutely linked to the progress or lack of, on Brexit. With no fresh and firm talks beginning until next month with the EU Council meeting towards the end of March, the market is feeding off any news it can, hence the reaction we have seen for the Pound today.
Key UK economic data this week
Tomorrow see the release of UK Unemployment data which will be very important for any swings on the Pound, markets have been focusing their attention on the Average Earnings figures, to see if wage growth is keeping pace with Inflation. Any signs that wages are rising will support the Pound as it gives the Bank of England more leeway to raise interest rates, which would make the Pound a more attractive currency to hold.
Thursday’s GDP (Gross Domestic Product) data is also key, the UK has been lagging in the growth stakes and markets will be keen to understand this latest reflection of progress in the UK economy.