The pound fixated on Breckside
On Tuesday, the USD bulls tempered enthusiasm, which allowed most currencies to exhale after an aggressive fall yesterday. The pound was no exception, climbing from the lows marked 1.2826, noted on Monday. But the observed rebound does not inspire confidence and resembles, rather, the calm before a new storm.
The reaction of sterling to the data on the labor market in Britain (or rather, lack thereof) is very significant. Wages have risen the highest since the third quarter of 2015 rate, and the rate of earnings excluding bonuses was the highest in nearly ten years. It would seem that what is not a reason to rally, especially as the pound looks quite attractive for purchases after the recent collapse.
But traders have approached the release with a cool head. Players do not hurry to open long positions owing to the prevailing uncertainty around Brekzita. Despite the fact that officials claim to reach agreement on 95%, the remaining 5%, including the question of the Irish border, do not give rest to the markets. Thus, the threat of exit no transaction is saved, though has decreased recently.
All of this suggests that the pound will continue to ignore any positive signals as long as London and Brussels will not create conditions for the conclusion of a comprehensive agreement. And traders can’t put a price in an earlier rate hike by the Bank of England, referring to the notorious uncertainty enveloped the painful “divorce proceedings”.
Thus, in the short term remains current sales strategy of the pound on the rise, especially in the context of a strong dollar, which is nourished in a reluctance of investors to take risks.
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