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British Pound Hits Two-Month Highs On New Brexit Optimism

British Pound Hits Two-Month Highs On New Brexit Optimism

David Cottle, Analyst

Talking Points:

  • GBP/USD has risen to its highest point since September
  • Persistent press reports of Brexit -negotiation progress have helped it
  • Caution remains warranted though. Talks have been torturous and will probably remain so

Are you new to theGBP trading world? Our beginners’ guide is here to help

The British Pound rose to levels not seen since September on Thursday thanks to hope that some progress is at last being made in the torturous Brexit negotiation process.

Reports Wednesday suggested that UK’s vexed “divorce settlement” from the European Union was approaching agreement. They were followed up by others, citing negotiators, which said that the at-least-equally prickly question of the UK’s land border with Ireland was also moving forward. While tangible progress remains scant, there does seem to be at least an impression that talks could stop stalling and possibly move along to trade and the UK’s post-Brexit position. This is something the markets would dearly like to see.

Sterling investors certainly welcomed this prospect. GBP/USD climbed to 1.3479, it highest point since late September.

British Pound Hits Two-Month Highs On New Brexit Optimism

EUR/USD also tracked the Pound upward but at a less dramatic pace.

Of course, the UK currency will remain extremely vulnerable to negotiation news-flow in the days and weeks ahead. If the process so far has taught markets anything it’s that there won’t be linear progress. Setbacks will abound. Still, for the moment the scenario under which the UK crashes out of the EU without any sort of deal at all seems distant. This was something of a nightmare scenario for markets because of the myriad questions it would leave unanswered, both for the UK and the 26-member bloc.

GBP/USD has now risen for nearly all of the past fourteen sessions, helped admittedly by some general US Dollar weakness last week as the US Federal Reserve seemed more worried than it had been by inflation’s weakness.

British Pound Hits Two-Month Highs On New Brexit Optimism

It remains in a clear uptrend channel form the lows of mid-November and, indeed, has just attempted to break out of that range to the upside.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.