Pound extends gains on Brexit noise


Investors take Brexit comments positively

The pound rallied to the highest level in nearly two weeks during the Asian session amid slightly more positive sentiment on a Brexit deal. Dow Jones reported that unnamed diplomats had said the gaps on the Ireland border issue had been narrowed, though still with differences, and were predicting that a deal could be settled by Monday.

Earlier, Ireland’s foreign minister had said he still sees a strong chance of a Brexit deal and hopes to get more certainty in the next six weeks. UK Brexit Minister Raab also said that talks have intensified, though reiterated that the UK would not accept any deal that threatens its constitutional integrity while a govt spokesman said a new Irish border proposal would be put forward “in due course”.

While the comments lack substance, and traders have been subsequently disappointed by such headlines in the past, investors have interpreted them positively and, coinciding with a mild bout of weakness for the US dollar, have bid GBP/USD higher. GBP/USD traded as high as 1.3162 in Asia, the highest since September 27, and the next potential resistance point could be the September high near 1.33, should momentum continue.

GBP/USD Daily Chart

Source: Oanda fxTrade

Data to support recent gains?

Today we see how the UK’s manufacturing sector is faring when faced with Brexit and trade war uncertainty. So far the impact appears to be negligible, and this month’s data is unlikely to upset that theme. Industrial production is seen rising 1.0% y/y in August following a 0.9% advance in July. The trade deficit is expected to widen to GBP10.9 billion from GBP9.97 billion while the trade balance outside of the EU is forecast to widen to GBP3.1 billion from GBP2.8 billion. If the numbers are better than forecast, this could extend the pound’s recent bullish bias.

UK Data Calendar

Source: MarketPulse

US producer prices to lead in to CPI

While the US data highlight for this week will be the CPI data tomorrow, September’s PPI numbers are released today and could give a hint of what is to come. Producer prices are expected to be 2.8% higher than a year ago, the same as in August. Store sales will be measured by the Redbook Index, while wholesale inventories are seen steady in August. Fed’s Evans speaks to complete the event and data deck.

The full MarketPulse data calendar can be viewed at https://www.marketpulse.com/economic-events/

Source: MarketPulse

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Andrew Robinson

Andrew Robinson

Senior Market Analyst at MarketPulse
A seasoned professional with more than 30 years’ experience in foreign exchange, interest rates and commodities, Andrew Robinson is a senior market analyst with OANDA, responsible for providing timely and relevant market commentary and live market analysis throughout the Asia-Pacific region. Having previously worked in Europe, since moving to Singapore he worked with several leading institutions including Bloomberg, Saxo Capital Markets and Informa Global Markets, proving FX strategies based on a combination of technical and fundamental analysis as well as market flow information. Andrew began his career as an FX dealer with NatWest and the Royal Bank of Scotland in the UK.