The Pound exchange rate rallied against other currency majors including the US Dollar (GBP/USD), Australian Dollar (GBP/AUD), and the Euro (GBP/EUR) as Brexit optimism regarding a divorce deal swept the market.
So far in Wednesday’s European trading, the GBP/USD exchange rate has hit highs of 1.3430 (a two-month high), GBP/EUR has reached levels of 1.1315, and GBP/AUD has peaked at 1.7695 – a fresh 14-month high.
Investor sentiment rose as reports flooded Britain that a divorce deal in the region of £50 billion could be made, which would allow talks to move onto trade. If this were to happen it could prevent a disorderly Brexit taking place in 2019.
Berenberg bank representative Kallum Pickering commented:
‘We expect UK PM Theresa May to present a formal offer on the Brexit bill, EU citizens rights, and the Irish border question at the upcoming 4th December dinner between May and EU Commission President Juncker. We expect the offer to meet the EU’s requirement for “sufficient progress” on the Brexit divorce. If such progress is made, expect the UK and the EU to move negotiations on to potential transitional arrangements and post-Brexit trade at the 14-15th December EU Summit.’
However, there’s speculation that a big divorce settlement might not translate into a good trade deal. Additionally, the issues surrounding the Irish border are likely to be rather in depth and may remain a problem without an easy solution.
Additionally, on Wednesday, UK consumer credit growth reached an 18-month low showing borrowers are reining in their credit. The October unsecured consumer credit number showed a 9.6% growth on the year, a decline from the previous month’s 9.8% and the smallest increase since April 2016. Mortgage growth was also slower, with Bank of England (BoE) figures highlighting mortgage lenders approved 64,58K in October, following a healthier 66,11K in September.
Meanwhile, in the US, it’s a huge week for President Donald Trump as he tries to achieve a legislation victory in the form of his tax plan. This week will see massive debates take place on the topic with a vote expected to occur as soon as Thursday. At the Budget Committee lawmakers have raised objections which could translate into problems further down the line.
Another factor that could influence the US Dollar this week are tensions with North Korea. Trump labelled the nation as a state sponsor of terrorism in November and after a quiet period, North Korea has launched a ballistic missile which the Japanese coast guard has stated dropped into the sea near Japan.
Meanwhile, in the Eurozone, Business Confidence came in at 1.49 in November, up from 1.44 the month before. Consumer Confidence also rose, from -1.1 in October to 0.1 in November. Industrial Sentiment, Services Sentiment, and Economic Sentiment all registered gains too. The Eurozone Consumer Inflation Expectations index also noted an upswing from 14.7 to 16.0.
#Eurozone economic sentiment indicator reached its highest level since October 2000❗️
Survey points to solid and faster GDP growth in Q4, in line with PMIs. /via @nghrbi ???????? ???? pic.twitter.com/2eAk1whGdG
— Yannis Koutsomitis (@YanniKouts) November 29, 2017
Germany’s Inflation Rate figure will be released later in the session, followed by German and Eurozone unemployment data on Thursday.
Over in the Trans-Tasman, Australia’s having a quiet week for economic data, but Thursday will heat up with a dew releases ahead of next week’s busy calendar. Next week investors will be looking towards the Reserve Bank of Australia (RBA) interest rate decision, the Australian Gross Domestic Product (GDP) growth rate, RBA Bulletin and trade balance stats.
The Pound to US Dollar (GBP/USD) exchange rate is currently residing at 1.3403. The Pound to Australian Dollar (GBP/AUD) exchange rate is trending in the region of 1.7678. The Pound to Euro (GBP/EUR) exchange rate is trading at 1.1308.