This has buoyed hopes of a possible breakthrough for the deadlock between the UK and the EU over the backstop issue, and with any signs of MPs – particularly hard Eurosceptics – backing Prime Minister Theresa May’s deal, we could see the pound rise further.
European Research Group member Steve Baker remained sceptical, saying: “This seems to indicate a satirical approach to fulfilling the Brady amendment which the Government whipped for … that’s light years away from tweaking arbitration mechanisms.”
Sterling was left relatively unmoved by poor Markit construction PMI figures for February, which fell into contraction at 49.5 – its first fall in 11 months.
Tim Moore, an Economics Associate Director at IHS Markit, commented: “The UK construction sector moved into decline during February as Brexit anxiety intensified and clients opted to delay decision-making on building projects.”
Meanwhile, the US dollar weakened on reports that US-China trade talks are nearing their final stages, and with the US potentially lifting most of the trade sanctions on Chinese goods, this has lowered safe-haven demand for the US dollar.
Some US dollar traders, however, have remained cautious with a lack of details on the agreement.
Tai Hui, an Asia Pacific Chief Market Strategist at JP Morgan Asset Management, remained critical, saying: “There are still significant structural differences between the two countries on issues such as forced technology transfer, intellectual property right protection and market access … but a more sustained ceasefire on tariffs will help to reduce business uncertainty.”
The continuing domestic political upheavals in the US are weighing on ‘greenback’ sentiment today, with the Democrats further investigating what they call President Donald Trump’s “abuse of power” following his ex-lawyer, Michael Cohen, testifying before the House of Representatives last week.
Mr Trump hit back, tweeting: “Presidential Harassment by ‘crazed’ Democrats at the highest level in the history of our Country. Likewise, the most vicious and corrupt Mainstream Media that any president has ever had to endure.”
The GBP/USD exchange rate will likely be driven by ongoing Brexit developments this week, with any signs of an improvement of consensus within Parliament likely providing Sterling with some further uplift.
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