GBP Rises on Soft Brexit and Weak Dollar

The pound rallied to a fresh post-European Union referendum high as hopes of a soft Brexit and stronger-than-expected labor market data bolstered the currency against a weaker dollar.

Sterling gained against most major peers as signs that Britain may stay close to EU rules after leaving the bloc helped the currency extend earlier gains, made on the back of strong jobs figures. The pound has also benefited from broad greenback weakness, with the U.K. currency advancing more than 2 percent over the past three days as market positioning becomes increasingly sterling-bullish.

The slide in the dollar is one variable,” said Jeremy Stretch, head of Group-of-10 currency strategy at Canadian Imperial Bank of Commerce. “The strong rebound in the employment level is supportive as is the increasing assumption of a softer Brexit coming from the language of U.K. ministers.”

After data showed British employment rose and wage growth edged up, pound bulls gained further solace when U.K. Brexit Secretary David Davis told lawmakers the nation will initially stay closely aligned to the EU’s regulatory regime after it leaves before choosing whether to go its own way in the future. He also said an agreement could be fixed on a transition period following Brexit by March.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza