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Brexit Briefing: GBP Drifts Lower as Triggering of Article 50 Nears

Brexit Briefing: GBP Drifts Lower as Triggering of Article 50 Nears

Nick Cawley, Senior Strategist

Talking Points

- GBPUSD giving back some of Tuesday’s inflation-driven gains.

- EU divorce talk to harden next week.

- See the DailyFX Economic Calendar and see what live coverage for key event risk impacting FX markets is scheduled for the week on the DailyFX Webinar Calendar.

The British Pound is back under pressure Wednesday with one week left until UK PM Theresa May triggers formal proceedings for the UK to leave the European Union. The pound, one of the best performing currencies since last week’s FOMC meeting, is back below 1.24400 and giving back some of Tuesday’s gains. GBPUSD jumped yesterday after UK inflation spiked to 2.3%, up from 1.8% in the previous month, as traders start to mull higher UK rates.

Chart: GBPUSD One –Hour Timeframe (March 16 – March 22, 2017).

Chart by IG

And the pressure on sterling is unlikely to abate as formal Brexit negotiations draw near. Both sides are expected to lay out their toughest arguments as proceedings start before compromise sets in further down the track. The EU negotiators are expected to re-iterate their unwavering commitment to the ‘four pillars’, the single-bloc’s four key principles, while the UK will repeat that it wants complete control over movement from the EU while keeping full and free access to the trading block.

European Council President Donald Tusk said yesterday the EU leaders will meet on April 29 to discuss their Brexit guidelines.

During a press conference in Brussels, Tusk said that he wished that the UK hadn’t chosen to leave the EU. “But the majority of British voters decided otherwise,” before adding “Therefore we must do everything we can to make the process of divorce the least painful for the EU.”

Upcoming GBP Event Risk

EventsDate, Time (GMT)ForecastPrevious
UK Retail Sales Y-o-Y(Feb)March 23, 0930 GMT 2.60% 1.50%
UK M4 Money Supply M-o-M (Feb)March 29, 0930 GMT 0.90%
UK Gross Domestic Product Y-o-Y Q4 March 31, 0930 GMT2.0% 2.0%

Markets

Index / Exchange RateChange (Exchange Hours/GMT Session Rollover)Market Close/Last
FTSE 100-0.91%7,312.00
DAX-0.56%11,895
GBP/USD-0.25%1.2440
EUR/USD-0.01%1.0805
EUR/GBP0.24%0.8683

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

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