As the highly anticipated EU Summit quickly approaches, headlines on the on-going Brexit negotiations continue to dictate the Pounds performance. On Tuesday’s session we saw cable slip from the 1.30 mark into the 1.29’s. This morning we saw GBPUSD drop all the way to 1.2862 – but the pair quickly recovered and has managed to sustain itself in the 1.29’s.
Opening yesterday at 1.3029, GBPUSD was rangebound until late in the session when it started to lose some ground. By the end of the day cable was trading at 1.2969.
As for GBPEUR – the pair managed to support itself in the 1.10’s throughout the day, opening at 1.1056 and closing off at 1.1049.
Sterling’s recent tumble is due to rising fears of a no deal Brexit. PM Johnson held his weekly cabinet meeting yesterday, where he updated his ministers that “while we want a deal on the right terms, if we can’t get there we are ready and willing to move forward with an Australian-style outcome”. As negotiations intensify, Johnson will today talk with Ursula von der Leyen, President of the European Commission, with the hope of both sides coming closer to agreeing a deal. No doubt a topic of discussion will be fishing – which remains a sticking point. French President Emmanuel Macron has threatened to vote against any agreements on a deal unless French fishermen are able to maintain access to British waters. In contrast, Angela Merkel took a more neutral stance on the matter, noting that “we want an agreement… but we have to bear in mind the realities because an agreement has to be in the interests of both sides, in the British interest and in the interest of the EU’s 27 member states”.
Yesterday also proved to be a tough day for EURUSD, the pair gradually eased back closer to 1.1700 as the day progressed. The pair opened the day at 1.1784 and finished the session at 1.1737.
On the data front, there is little to report in regard to economic releases, but there is a host of speeches from both the ECB and the Fed. At 09:00 ECB President Christine Lagarde will give a speech, followed by her ECB colleague Yves Mersch. Then in the afternoon we have speeches from Fed members Clarida, Quarles and Kaplan.