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By Associated FX Analysis Team

Kantox currency update: the new Brexit deal boosts the pound

Published March 12, 2019

The pound rallied sharply on Monday after the UK cabinet announced that Theresa May has secured legally binding changes to the Brexit deal on her meeting with European Commission President Jean Claude Juncker.

The market has celebrated this last-minute agreement, pushing the pound 2% higher against the dollar, on hopes that the concessions from the EU will convince rebellious lawmakers to support May’s withdrawal plan on today’s voting.

EUR/USD picking up from 21-month lows. The euro appreciated for the second consecutive day on Monday, favoured by the new Brexit agreement which has helped the pair to bounce up from 1.1180 lows and reach levels close to 1.1300. As at the London market opening times, the EUR/USD is trading at 1.1270.

GBP/USD rallies beyond 1.3200. The pound bounced on Monday art 1.2960 lows and has rallied all the way to 1.3290 highs on Tuesday’s early trading, boosted by investors’ hopes that May’s deal with the EU will help her to obtain parliamentary support for her Brexit plan. As at London market opening times, the GBP/USD is trading at 1.3205.

USD/JPY bounces up from 110.75 lows. The dollar appreciated on Monday with the yen weighed by a more positive market sentiment, which has helped the dollar to trim last week’s losses although it remains capped below 111.50.  As at London market opening times, the USD/JPY is trading at 111.35.

 

In the Calendar Today

 The most relevant event will be the UK parliamentary vote on the Brexit. With only some weeks for the Brexit deadline, a positive result on the voting might provide a strongly positive impact on the pound, while another rejection is likely to send the pound to long-term lows.

Later on, also in the UK, National Statistics will release the UK Industrial and Manufacturing production data, although, with all eyes on the Brexit vote, these indicators are likely to pass unnoticed.

In the US, the Consumer Prices Index is expected to show that inflation has remained growing at a 1.6% year on year level -down from its 2.9% peak in July-. If the expectations are confirmed, the impact on the dollar, thus, is expected to be neutral to negative.

N/A   GMT          UK: Parliamentary vote on the Brexit

09:30   GMT      UK: Manufacturing Production (MoM) (Jan)
Prev: -0.7%         Cons: 0%

09:30   GMT      UK: Industrial Production (MoM) (Jan)
Prev: -0.5%         Cons: 0.1%

12:30   GMT      US: Consumer Prices Index (YoY) (Feb)
Prev: 1.6%         Cons: 1.6%

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