Investing.com - Sterling struggled on Friday morning as markets showed caution ahead of the afternoon speech by UK Prime Minister Theresa May in Florence.
At 09:38 GMT, GBP/USD slipped 0.15% to 1.3561. Cable had an intraday high of 1.3596, just short of 1.3600.
The speech by Theresa May is expected to start the ball rolling in the stagnant Brexit negotiations. The talks have been delayed in order to allow May the time to make ‘the speech of her career.’
Trade talks are yet to begin between the EU and the UK. The position of EU citizens in the UK; the Irish border and the ‘divorce bill’ were all supposed to be settled before the trade talks begin. The BBC reported that Theresa May is to offer a sum of 20 billion euros as an exit settlement.
She is thought to wish to bypass chief Brexit negotiator Michel Barnier and appeal directly to the leaders of the European Union nation states, in order to start trade talks from October.
Investors will be watching the speech closely to determine if the government will pursue a hard-Brexit approach - the choice of many eurosceptic backbench MPs in May’s minority government - or if the Prime Minister has shelved the ‘no deal is better than a bad deal’ mantra in favour of a soft-Brexit.
A soft-Brexit approach, supported by many businesses, and could include a transition period following Britain’s exit from the bloc in March 2019.
The dollar made significant gains on Wednesday evening following a hawkish Federal Reserve statement. The dollar gains did not last through Thursday as traders questioned the likelihood of 4 rate hikes from now until the end of 2018, given that the makeup of the Federal Reserve will change significantly in this time. Geopolitical tensions resurfaced, putting pressure on the greenback.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.34% to 91.66.
The euro enjoyed a rally on Friday morning following flash PMI releases. German manufacturing topped 60, ensuring that the European Union ended the quarter on a high.
EUR/GBP surged 0.56% to 0.8841.
North Korea’s leader Kim Jong-un spoke out in retaliation to US President Donald Trump’s UN speech. He threatened hydrogen bomb tests in the Pacific, which sent some safe haven currencies higher.
GBP/JPY was down 0.62% to 151.82, while GBP/CHF was 1.3127, down 0.42%.
Sterling slipped against the commodity currencies. GBP/AUD was down 0.56% to 1.7022, with GBP/NZD at 1.8504, down 0.45%.
GBP/CAD was 1.637, a drop of 0.63%.
Investors will be looking at the result of the German federal election on Sunday. Angela Merkel is expected to continue her chancellorship, however the question is who her party, the CDU, will form a coalition with.