Unlike its European buddies, the pound was one of the better-performing currencies in the previous week, thanks mostly to upbeat data and fading Brexit concerns.
Without any major economic reports lined up from the U.K. economy this week, market watchers could pay extra close attention to Brexit-related updates in the days ahead. After all, the EU Brexit draft guidelines were leaked recently and British officials don’t seem too pleased about those plans.
Remarks from government leaders from both sides, particularly those involved in the actual negotiations, could give pound traders a better idea of how the next set of talks might play out. Any signs of hostility could dampen business sentiment once more, possibly forcing sterling to retreat.
Last Week’s Price Review
The pound is the third best-performing currency of the week (as of 3 pm GMT), losing out only to the Aussie and the Kiwi.
But as you can see in the overlay of GBP pairs, however, the pound’s price action was a complete mess, with plenty of instances when price action diverged, which is a sign that the pound was vulnerable to opposing currency price action.
With that said, the pound actually started the week strong, thanks to the U.K.’s better-than-expected services PMI reading (54.5 vs. 53.3 expected, 53.0 previous).
After that, the pound’s price action became a chaotic mess on Tuesday. The pound’s price action was still a bit messy on Wednesday, but at least there was some semblance of uniformity since it began to dip ahead of the expected release of the E.U.’s Brexit guidelines.
This was likely due to preemptive selling since the pound began to find buyers when the E.U.’s Brexit draft guidelines were leaked, even though the E.U. took a hard stance against giving the U.K.’s financial services industry full access to the single market.
But then again, the guidelines also showed that the E.U. “confirms its readiness to initiate work towards a free trade agreement (FTA), to be finalised and concluded once the UK is no longer a Member State.” And that may have enticed some pound bulls to jump in.
Follow-through buying was limited, though, and the pound’s price action became another chaotic mess on Thursday, before tilting broadly to the upside on Friday.
There was no apparent catalyst for the pound’s rise on Friday, though. In fact, the available catalysts were all seen as net negative by market analysts.
Anyhow, the pound’s early rise on Monday, the dip demand on Wednesday, and the pound’s strange rise on Friday are the reasons why the pound is currently on track to closing above last week’s closing prices (dashed horizontal line).