The Pound has begun Wednesday trading in a tight range against the US Dollar and Euro, as markets watch for developments in Theresa May’s Brussels Brexit meeting. The Pound had enjoyed a rally on Tuesday as Brexit developments supported the British currency. The Pound to US Dollar (GBP/USD) exchange rate marked its biggest daily gain in nearly four months, while the Pound to Euro (GBP/EUR) exchange rate hit its highest level in February so far.
Update: 17:05 GMT – The Pound is closing European trading at 1.3077 versus the US Dollar, while hitting 1.1500 against the Euro.
Update: Sterling Softens as Tory MPs Resign to Join Independent Group
The Pound remained relatively resilient when news hit that three Tory MPs were resigning to join the Independent Group along with some members of the Labour Party that had resigned the day before. These developments may impact Brexit negotiations as it puts more pressure on the government to fight for a softer Brexit. Investors are waiting for the release of the US Federal Reserve’s meeting minutes which may influence the USD exchange rate significantly, especially if a dovish tone is struck.
Pound Exchange Rates (GBP/EUR, GBP/USD) Jump Ahead of May/Juncker Brexit Meeting
The Pound rallied on optimism for today’s meeting between Prime Minister Theresa May and European Commission President Jean Claude Juncker. Hopes are high that the part of the agreement detailing the Irish border backstop could be amended which could lead to a vote on a revised agreement before the 27th February deadline. Juncker is downplaying the possibility of a breakthrough, which has the potential to impact Sterling while markets await a result.
Additionally, UK labour market data yesterday showed wage growth was outpacing inflation. The Pound to US Dollar (GBP/USD) exchange rate managed to climb above the 1.30 mark, while the Pound to Euro (GBP/EUR) exchange rate peaked at 1.15. This morning, the currency pairs are in a tight range, with GBP/USD peaking at 1.3076 and GBP/EUR hitting highs of 1.1519.
UK unemployment held steady at a four-decade low of 4.0%, while earnings increased by 3.4% in December, just slightly below the 3.5% forecast. Meanwhile, the employment rate came in at 75.8%, the joint-highest figure on record since 1971.
Pound US Dollar (GBP/USD), Sterling Euro (GBP/EUR) Exchange Rate Forecast Today
There are a number of economic events which could impact the Pound Euro and Pound US Dollar exchange rates today. Eurozone and German ZEW surveys will be out this morning and could encourage some significant movement in Euro exchange rates. Meanwhile, European Central Bank (ECB) representative Peter Praet will speak in Berlin on Tuesday which could also create some EUR fluctuations.
Across the pond, the US Federal Open Market Committee (FOMC) will publish its January meeting minutes which could be interesting in terms of insight for the Federal Reserve’s future monetary policy path. A dovish tone could create some significant US Dollar losses.
At present, the Pound to Euro (GBP/EUR) exchange rate is trading at levels of 1.1485. The Pound to US Dollar (GBP/USD) exchange rate is trading at 1.3034.