“GBP has been performing better on the view that the British Prime Minister, Theresa May, has a new Brexit deal to put in front of cabinet colleagues – perhaps at a meeting this weekend,” point out ING analysts.
“Any news that a Brexit summit is back on the table for late November could also give GBP a boost. Assuming Brussels does not pull the rug from under Downing Street once again, the focus will then shift onto whether Mrs May can get the deal through parliament – which has been promised a ‘meaningful’ vote. Its passage looks highly uncertain.”
“That said, the UK economy is performing reasonably well and this week should see UK wages, inflation and retail sales all coming in on the strong side. Thus were it not for Brexit, pressure would be building for another BoE rate hike. Currently, the market struggles to see the next BoE rate rise within a year. On balance we see GBP staying reasonably bid on temporary Brexit optimism, but larger gains look to be had against the EUR rather than the USD.”