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Forex - Sterling mixed on Brexit transition deal rumours

Published 13/10/2017, 13:27
© Reuters.
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Investing.com - Sterling was largely mixed on Friday as the pound proved sensitive to varying Brexit negotiation rumours.

At 12:15 GMT, GBP/USD was 1.3273, a modest increase of 0.08%. Earlier on Friday, cable moved above the 1.3300 mark for the first time in 10 days. Its intraday low was 1.3249.

On Thursday evening, the pound recovered some of Thursday’s Brexit deadlock losses after the German newspaper Handelsblatt reported that the EU would agree to a post-Brexit transition phase of up to two years following the UK’s exit from the bloc.

Sterling’s gains continued into Friday morning’s session, however comments from the German government stating that it was too early to discuss a transition period pushed the pound lower again.

The pound regained composure against the dollar ahead of inflation and retail sales data from the US. The euro weakened on reports that the European Central Bank would extend its QE programme until September 2018, and reduce bond purchases to €30 billion per month starting January 2018. Indicating that interest rates would continue at their historic lows.

EUR/GBP was 0.8898, down 0.25%, while EUR/USD stayed above the 1.18 mark and fell only 0.18% to 1.1810.

The US dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was steady at 93.05. It spent much of the morning close to its 2-week low of 92.64.

The release of the FOMC minutes from the September Federal Reserve meeting highlighted some concern over inflation rates in the US. The release of inflation data and retail sales will be closely watched as this will be an indicator as to whether the Fed will go ahead with the third interest rate hike of the year in December.

GBP/JPY was flat at 148.92. GBP/CHF rose 0.20% to 1.2962.

Against commodity currencies, sterling remained fairly flat. GBP/AUD was 1.6951, down just 0.05% with GBP/NZD down 0.06% to 1.8594.

GBP/CAD jumped 0.27% to 1.6593.

Investors will be looking for employment data from the UK next week, the last release before the Bank of England Monetary Policy Committee meeting to set interest rates in November.

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