There was no doubt that Sterling, by far, was the one to rule them all this week! What were the latest Brexit developments that kept the bulls in control once again?
Major Market Drivers for the British Pound
The British pound had a heck of a run this past week, beating out most of the majors by at least two percentage points (the Kiwi found strength after positive inflation data to buck the trend). Most of that rally is likely attributed once again to Brexit developments, and this time the driving theme seems to have been the battle against a no-deal exit–the most disastrous outcome scenario for both the U.K. and European Union.
After Theresa May’s “Plan B” was rejected on Monday, parliament members were given the opportunity to add amendments to the plan, one of which was the likely spark for Sterling’s bullish run.
Labour Party MP Yvette Cooper put forth an amendment that would mandate ministers to extend article 50 if it appeared they were to approach a no-deal Brexit, basically giving control of the Brexit process to parliament if there was no deal by the end of February and effectively blocking a no-deal Brexit. The support for this type of scenario grew throughout the week, which again is likely the reason why traders remained bullish on Sterling; a reduction in probability of a no-deal Brexit scenario will likely continue to bring in more buyers back to Sterling and U.K. assets.
Beyond Brexit, it’s possible that Sterling also drew in buyers after the latest wages data showing the fastest growth since before the 2008 financial crisis and the unemployment rate dropping to 4.0%, the lowest since 1975. The British pound immediately popped on the news, but again the plan for parliament to take over the Brexit process and block a no-deal outcome was the big driver higher for Sterling on the week.
United Kingdom Headlines and Economic data
- Theresa May’s Brexit ‘plan B’ rejected by Europe
- U.K. Wages Are Growing Faster Than Any Time Since 2008
- UK employment total hits record high
- Momentum gathers behind British MPs’ bid to stop no-deal Brexit
- Labour ready to whip MPs to back Cooper’s no-deal amendment
- Andrea Leadsom says EU could delay Brexit to get deal through