GBP Keeps Drifting North on Brexit Optimism, Canada’s CPIs on Today’s Agenda
The pound was once again the main gainer among the G10 currencies, getting another boost by headlines suggesting that the differences between the EU and the UK have continued to narrow. The Kiwi was among the main losers despite New Zealand’s better-than-expected inflation data for Q3, while the Loonie was the second winner in line, with its traders awaiting Canada’s CPIs for September.
Pound and Risk Appetite Boosted by More Brexit Deal Hopes
The dollar traded higher against most of the other G10 currencies on Tuesday and during the Asian morning Wednesday. It gained the most against AUD, NZD and NOK, while it underperformed against the pound and slightly against CAD. The greenback was found virtually unchanged versus EUR and SEK.
The pound remained in the spotlight and was once again the main winner on the G10 dashboard. Optimism surrounding a Brexit deal continued to build up, with headlines suggesting that the differences between the EU and the UK have continued to narrow. What was different this time around is that Brexit-related reports have not affected the pound only, but also the broader market sentiment, with investors sidelining any US-China headlines. Major EU and US indices closed in the green, with most of them gaining more than 1%. The exception was the UK FTSE 100, which was kept down by the strong pound. Remember that many companies of the index generate profits in other currencies, so in a strengthening GBP environment, if those profits are converted into pounds, they worth less.
That said, EU Brexit negotiator Michel Barnier said yesterday that a legal text by the end of the day was needed in order to get a deal by this week’s summit. Still, markets are waiting for the outcome of talks that dragged beyond midnight. In any case, our view remains the same as yesterday. The pound may continue gaining on headlines suggesting that the two sides are getting closer into finding a deal However, they may not be able to do it by the end of this week, which would mean more negotiations and perhaps some…