Pound surges on reports EU and UK have agreed on Brexit text

The latest situation is that optimism is once again on the rise that a deal on the terms of the UK’s departure from the EU is imminent.

My US colleague Matt Weller was absolutely correct when he noted yesterday that “… we suspect this won’t be the last Brexit/GBP report we write this week!” So, here we are again, writing about the pound and Brexit. The latest situation is that optimism is once again on the rise that a deal on the terms of the UK’s departure from the EU is imminent. UK’s prime minister Theresa May earlier said that only a “small number of outstanding issues” remained. In the last few minutes, unconfirmed reports have emerged that the EU and UK negotiators have agreed a text on how to avoid a hard border on the island of Ireland. The GBP/USD, which had been higher all day, jumped to a high so far of around 1.3015. The rebound comes after a sharp sell-off yesterday, triggered by concerns that Mrs May would not be able to win parliamentary support for a Brexit deal.

UK wages growth highest since December 2008

Also boosting the pound today was news that domestic wage growth accelerated to an almost 10-year high in September. The ONS reported this morning that average earnings, excluding bonuses, rose 3.2% in the three months to September from a year earlier. This was the best showing since December 2008 and higher than 3.1% expected. Meanwhile wage growth including bonuses accelerated to 3%, as expected, up from 2.8% previously. But it wasn’t all good news. The UK unemployment rate unexpectedly rose from a 43-year low to 4.1%, while the number of claims for unemployment relate benefits rose by 20,200 applications against a much smaller 4,300 expected. This is the fifth consecutive month that jobless claims have disappointed expectations.

GBP/CAD one to watch

If sterling now manages to push decisively higher, it is worth checking to see which pound cross has been outperforming recently. Among them, the GBP/CAD has already put in a few higher lows and with oil prices slumping recently, the Canadian dollar, which tends to track oil’s volatility, could fall further. As a result, the GBP/CAD could stage a breakout above key resistance in the 1.7290 level soon. However, if there’s no Brexit agreement then all bets are off again.

Source: TradingView and FOREX.com.

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