British Pound "Diffuse" Today, Follows Broader Euro and US Dollar Trends

Pound Sterling was hit by an all-round stronger US Dollar while a holding pattern against the Euro is emerging as markets bide their time ahead of the next round of Brexit talks.

The Pound-to-Euro exchange rate trades at 1.1351 at the time of writing, up 0.10% while the Pound-to-Dollar exchange rate is seen 0.28% lower at 1.3135 amidst signs Sterling is to enter the mid-week session as a middle-of-the-road performer.

Pound Sterling showed “a diffuse trading pattern today,” notes analyst Piet Lammens at KBC Markets in Brussels noting the UK currency ceded ground against the Dollar but gained a few ticks against an overall soft Euro.

UK economic data were mixed with with Halifax house price numbers meeting expectations while very poor BRC retail sales confirmed the consumer is in something of an holding pattern.

“The impact of the data was not big, but the poor BRC sales, probably aborted the Sterling rebound on Friday and yesterday,” says Lammens.

The GBP/EUR rose temporarily above EUR/GBP dropped temporary above 1.1364 which is actually a big level as it equates to 0.88 in EUR/GBP, but has since relinquished ground once more.

Against the Dollar losses were more substantial with the exchange rate slipping down to 1.3130 from 1.3075 at the open overnight.

As we reflect here, losses are almost all down to the resurgent US Dollar - we note November is typically a month that the Dollar advances and it appears November 2017 is no exception.

“In the end, the intraday swings in cable and in EUR/GBP were primarily USD and Euro moves rather than Sterling inspired price action,” says Lammens.

No doubt, markets are likely to maintain something of an holding pattern until Friday, when the outcome of the fifth round of Brexit negotiations are made clear.

“The prospect of a deal between EU and UK to settle the Brexit bill is crucial towards moving to the next phase of Brexit talks on transition and trade – that would be supportive of Sterling,” says a note from Citi distributed to their clients.

A report over the weekend from the Times reveals, “European Union negotiators have started drawing up the outlines of a future trade deal with Britain after receiving signals from the UK government it would agree to pay more than €60bn (£53bn) for the Brexit bill”.

“Agreement on a divorce bill is crucial,” say Citi as this would allow talks to move on to the next phase of Brexit talks on transition and trade – “and definite progress here would likely be supportive of Sterling.”

Get up to 5% more foreign exchange by using a specialist provider by getting closer to the real market rate and avoid the gaping spreads charged by your bank for international payments. Learn more here.