The Pound has moved higher today as the market look for progress being made in Brexit talks between Theresa May and the EU this week.
Sterling had traded lower through the first couple of weeks of February but has started to edge back in the past few days. It remains caught in the ranges, however, as traders adopt a wait-and-see approach over Brexit before embarking on any bigger moves.
Theresa May is yet to win Parliament over on her deal and so far the EU are standing firm on not reopening the withdrawal agreement. May is still seeking changes to the contentious Irish border backstop arrangement. She feels that if she can guarantee that the UK will not remain indefinitely trapped within the EU, then she will have a solid chance of getting her deal ratified.
The political turmoil in Westminster continued yesterday with the resignation of a group of seven Labour MPs who are upset with Jeremy Corbyn’s leadership and Brexit policy. Opinions vary according to the impact this has on the Pound with some arguing that it hits Sterling because it reduces the odds of a second referendum, whilst others believe it’s Pound positive because it reduces the chances of Corbyn taking power which is seen as bad for business (and it could help increase the Tory majority). Either way, it highlights how volatile UK politics is and how Brexit is so divisive for party politics. Theresa May is also looking likely to face some similar resignation in the coming days!
As a result, the GBP/EUR is trading at the highest levels it’s been this month having moved up over 2-cents since last Friday. The GBP/USD is now close to a 2-week high with the market recapturing the 1.30 mark. Brexit will continue to dominant Pound sentiment and Sterling is likely to continue playing the ranges until we get more concrete evidence of what Brexit route we are taking. Continue to remain agile and take advantage of any spikes or dips in the market according to which side of the market you are.