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.