The Pound was given a boost against its major counterparts on Tuesday after a report suggested that the European Parliament will push for Britain to obtain ‘privileged’ access to the single market after it leaves the European Union.
Sterling rose by around 50 pips following the publication of a report published by Business Insider yesterday morning that suggested the UK and EU could be moving towards a mutually beneficial Brexit. The European Parliament is reportedly preparing a 60-page document, outlining the desire for an ‘association agreement’ with the UK. This comes in sharp contrast to recent comments from the EU’s Chief Negotiator Michel Barnier, who has insisted no special deals would be on the table.
Speaking in Vienna, Brexit Minister David Davis voiced confidence over reaching an agreement with Europe, saying that a deal by the end of 2018 was ‘well on the cards’. FX traders, however, didn’t take kindly to his rhetoric and the currency gave up some of its gains.
The Pound lost further ground this morning after the release of the latest UK labour report. Earnings data came in more-or-less in line with expectations, although the jobless rate unexpectedly increased to 4.4% from 4.3%, registering its single largest monthly increase in five years. We now await the Inflation Report hearings this afternoon, with Mark Carney set to speak just after 14:00 UK time.
Federal Reserve to release minutes of Yellen’s final meeting
An increase in US bond yields helped steady the Dollar in a day which lacked much in terms of major market moving news. The greenback shrugged aside recent concerns over the US’s twin deficit problem, edging almost half a percent higher against the Japanese Yen and a by a slightly smaller magnitude versus the Euro.
With markets relatively quiet in the first couple of days of the week, attention has already turned to the release of this evening’s Federal Reserve minutes from the FOMC’s January meeting, Janet Yellen’s last as Chair. Investors will be hoping to obtain more clarity on what was perceived as a slightly more hawkish assessment of the US economy following the 30-31 January meeting, including rationale behind the Fed’s near-term inflation upgrade. We expect the minutes to strike an upbeat tone, keeping the possibility of four rate hikes in the US this year firmly alive.