The pound is up sharply this morning as a Brexit breakthrough has finally been achieved. According to Bloomberg, the issues of a financial settlement, an agreement on Europeans living in the UK and a solution for keeping the Irish border open has been struck. The UK has now won the right to start negotiating a trade agreement. Trade will be a much tougher issue, as the European Union is unlikely to allow the UK to remain in the single market. So far, discussions have centered around a deal based on the existing free trade agreement between the EU and Canada. A 2-year transition deal extending the UK's access to the single market is now more likely. Our short-term and medium-term outlook remain bullish.
GBP/USD is currently just above 1.350. EUR/GBP is down today and the pair is currently trading above 0.8690. The pound is up against both the Australian dollar and the Canadian dollar. GBP/AUD is above 1.790, while GBP/CAD is just above 1.7350.
This week’s economic data includes PMIs, retail sales and industrial/manufacturing production. PMI construction beat expectations (53.1 vs. 51 expected). Earlier today, BRC Retail Sales were higher than the previous print (0.6% vs. -1% prior). Markit Services PMIs were lower than expectations (53.8 vs. 55 expected). Halifax house prices met expectations (3.9%). Later today, we’ll get industrial and manufacturing production. Last week, data relating to housing and home price growth suggested a sluggish outlook for real estate.