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Brexit negotiations are main sterling driver

Sterling exchange rates have been stuck in limbo due to comments made by EU officials following recent Brexit negotiations- fortunately, Donald Tusk (EU Council President) announced that recent comments made by Michel Barnier about Brexit talks hitting a “Deadlock” were over exaggerated and progression has been made between the UK & EU- Though this progress hasn’t been enough to discuss a trade deal- slow progress is better than no progress.

It has also been reported that Theresa May is looking to stump up another £20 Billion for the “Brexit Bill” and is very close to securing a deal to guarantee EU citizens rights- all of this points the Pound in the right direction- however, we will have to wait for confirmations of all of this for the Pound to actually move.

Onto this coming week, there are a few data releases/events that will be key for exchange rates- the first noteworthy release for the EU will be on Tuesday where both manufacturing and services data will be released- both are expected lower so if this comes out as expected we could see the Euro weaken on Tuesday morning which could provide some good opportunities for those of you selling Pounds to purchase Euros.

On Wednesday the UK will release GDP figures- which are expected to stay on par at 0.3% for the Quarter- as there has been a lot of concern about the UK economy recently, there is always a chance that we could see less growth in our GDP figures- and if we were to see a lower figure this could be pretty damaging for the Pound- we are not expecting a change- however it is always worth noting that economic data does not always come out as expected so expectations should be taken with a pretty big pinch of salt- especially with volatile economies like the UK currently.

The ECB will hold their interest rate decision on Thursday, there is no change in expected, however the big theme for the ECB this year has been their QE- so the markets will be waiting for Mario Draghi to comment about any potential tapering of QE purchases- this could be a very volatile few hours for the Euro- so if you are looking to trade throughout this period, it is worth looking at stop losses and limit orders to ensure you are protected.

Finally, on Friday the U.S will release their GDP figures which are in fact expected weaker than previous- so on expectations, I expect the Dollar will weaken, however, if the number comes in slightly better than what they have predicted this could be enough to push the GBPUSD exchange rate lower. A quick note on GBPUSD, there is still no direction- a drop below 1.30 would signal a bear move and a rise above 1.35 again would signal a bullish move.

As always, please don’t hesitate to contact us if you require any further analysis.

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