Talking Points

- It’s hard to avoid the conclusion that for now at least Brexit has ceased to be an important factor for either Sterling or London stocks.

- Monetary policy and geopolitical tensions are more important drivers and could help the Pound strengthen.

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The UK media have been full of stories this week about the Brexit timetable, UK access to EU research and development, immigration and the free movement of labor, efforts to lure businesses from London to other EU capitals and the divorce bill.

Yet the British Pound and London stocks have sailed serenely through the noise, affected more by geopolitical tensions, global risk and monetary policy. In particular the Pound, while not generally seen as a haven currency, is being helped by the growing belief that tighter monetary settings in the US and the Euro-Zone are being pushed further and further into the future.

Mario Draghi, the President of the European Central Bank, is unlikely to set out a timetable for tightening policy at his press conference tomorrow after the latest meeting of the ECB’s Governing Council.

Watch out for our live webinar covering the ECB’s policy decisions. You can sign up here

Meanwhile, the latest comments from US Federal Reserve officials have been distinctly dovish, benefiting the Pound at the expense of the Dollar.

Chart: GBP/USD One-Hour Timeframe (August 24 – September 6, 2017)

Brexit Briefing: GBP Ignores the Noise, Benefits from Weak USD

Chart by IG

From a technical perspective, GBPUSD has climbed back above the psychologically important 1.30 level and faces little resistance ahead of the July 18 high at 1.3120, then the August 3 high at 1.3265. EURGBP is easing back, has fallen below 0.92 and has dropped under the two-month support line joining the previous rising lows. Potentially it could decline as far as the four-month support line currently close to 0.90.

Chart: EUR/GBP Daily Timeframe (April 24 – September 6, 2017)

Brexit Briefing: GBP Ignores the Noise, Benefits from Weak USD

Chart by IG

As for IG Client Sentiment, that is currently sending out a bullish signal for GBPUSD, with 42% of retail traders long and 58% short.

Markets

Index / Exchange Rate

Change (Exchange Hours/GMT Session Rollover)

Market Close/Last

FTSE 100

-0.55%

7,332

DAX

-0.14%

12,106

GBP/USD

+0.07%

1.3042

EUR/USD

+0.25%

1.1944

EUR/GBP

+0.19%

0.9158

Upcoming UK/EU Event Risk

Events

Date, Time (GMT)

Forecast

Previous

German Industrial Production s.a. (MoM) (Jul)

Sep7, 0600

0.6%

-1.1%

German Industrial Production n.s.a. and w.d.a. (YoY) (Jul)

Sep7, 0600

4.6%

2.4%

Euro-Zone GDP s.a. (QoQ) (2Q F)

Sep7, 0900

0.6%

0.6%

Euro-Zone GDP s.a. (YoY) (2Q F)

Sep7, 0900

2.2%

2.2%

ECB Rate Decision

Sep 7, 1145

0.0%

0.0%

ECB Marginal Lending Facility

Sep 7, 1145

0.25%

0.25%

ECB Deposit Facility Rate

Sep 7, 1145

-0.4%

-0.4%

ECB Asset Purchase Target

Sep 7, 1145

€60b

€60b

--- Written by Martin Essex, Analyst and Editor

To contact Martin, email him at martin.essex@ig.com

Follow Martin on Twitter @MartinSEssex

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