Sterling surged on renewed Brexit optimism as Prime Minister May secured fresh EU concessions on the Northern Ireland backstop.

After initial losses, Sterling surged on renewed Brexit optimism as Prime Minister May secured fresh EU concessions on the Northern Ireland backstop ahead of Tuesday’s crucial House of Commons vote.

Mixed retail sales data-maintained uncertainty over the US outlook and expectations that the Federal Reserve policy would remain on hold.

A combination of Brexit hopes and increased confidence in global conditions underpinned risk appetite with weaker demand for the yen and Swiss franc while commodity currencies recovered.

The dollar also weakened slightly as Brexit hopes supported the Euro, although yield spreads limited potential US selling pressure.

Oil prices gained some support from firmer risk conditions while precious metals found solid support on dips.

Sterling volatility remained high in early Europe on Monday as Brexit rumours continued to swirl and reports that Prime Minister May could pull or amend Tuesday’s House of Commons meaningful vote had a negative impact, especially with speculation that May would be under severe pressure if the planned vote did not go ahead. The UK currency regained ground later in the session amid speculation that some form of modified text had been agreed between the EU and UK.

Sterling gathered further support after the European close as the Prime Minister confirmed that she would travel to Brussels amid rumours of a deal. After the US close, it was confirmed that agreement had been reached with the UK securing ‘legally-binding’ additions to the Withdrawal Agreement to offer reassurance that any use of the Northern Ireland backstop would be temporary.

Sterling surged on hopes that the House of Commons could approve the deal in Tuesday’s vote with GBP/USD highs near 1.3280 while GBP/EUR rose to 21-month highs above 1.1725.

There was a correction on Tuesday as uncertainty remained intense with markets also waiting for Attorney General Cox’s legal verdict on the changes. Another rejection in parliament would be liable to trigger sharp losses with volatility set to remain extremely high.

Economic Calendar

Expected Previous
09:30 GBP Industrial Production (M/M)(JAN) 0.20% -0.50%
09:30 GBP Industrial Production (Y/Y)(JAN) -1.30% -0.90%
09:30 GBP Manufacturing Production (Y/Y)(JAN) -1.90% -2.10%
09:30 GBP Manufacturing Production (M/M)(JAN) 0.20% -0.70%
09:30 GBP Trade Balance(JAN) -12.20B -12.10B
09:30 GBP Trade Balance Non EU(JAN) 3.70B -3.64B
09:30 United Kingdom GDP (M/M) - -0.4
10:45 European Central Bank Sabine Lautenschlaeger Speaks - -
12:30 USD CPI (Y/Y)(FEB) 1.60% 1.60%
12:30 USD CPI (M/M)(FEB) 0.20% 0.00%
12:30 USD CPI Ex Food & Energy (Y/Y)(FEB) 2.20% 2.20%
12:30 USD CPI Ex Food & Energy (M/M)(FEB) 0.20% 0.20%
13:00 GBP NIESR GDP Estimate - 0.20%
23:30 AUD Westpac Consumer Confidence(MAR) - 4.30%

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.