[vc_row][vc_column][vc_column_text]The pound rose sharply across the board on Friday, driven by hopes for a Brexit breakthrough between UK and EU officials.

As UK and EU officials agreed to hold intensive ‘tunnel’ negotiations over the weekend the mood towards the pound dramatically improved, buoyed by hopes that a Brexit breakthrough might finally be on the cards.

With officials expressing signs of tentative optimism ahead of the talks and commentary suggesting the light at the end of the tunnel was within sight, GBP exchange rates reacted by jumping to four-month highs.

However, market optimism soon slumped as the Irish border issue returned to frustrate discussions.

As the weekend came to a close with no visible signs of progress towards a deal, Sterling found itself exposed to significant selling pressure.

Demand for the pound may diminish further over the coming days if August’s UK labour market and wage data fails to impress, raising concerns for the UK economic outlook.

On the other hand, with forecasts pointing toward a higher consumer price index reading, GBP exchange rates could rally on the reduced risk of a Bank of England (BoE) rate cut.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]GBP/USD soars past $1.24, could a Brexit deal still be possible?

The pound was handed some much needed relief yesterday, roaring higher amid renewed optimism for a possible Brexit deal.

Sterling appears to be consolidating these gains this morning, with GBP/EUR stable at €1.1309, GBP/USD buoyed at $1.2460, and GBP/CAD flat at C$1.6533, while GBP/AUD and GBP/NZD both hold steady at AU$1.8362 and NZ$1.9690 respectively.

As the week comes to a close, expect to see Brexit share the spotlight with the conclusion of US-China trade talks in Washington.

What’s been happening?

The pound mounted a comeback on Thursday, rising in the wake of a meeting between Prime Minister Boris Johnson and his Irish counterpart Leo Varadkar.

In a joint statement the two leaders said they could see a ‘pathway for a deal’, triggering Brexit optimism which helped to drive some modest gains in Sterling.

On the data front, the UK’s monthly GDP print revealed a shock contraction in economic growth in August.

But after growth in July was revised higher, analysts are confident the UK will avoid a recession in the third quarter and the disappointing GDP reading failed to dent the pound.

The US dollar was the big loser yesterday, with demand for the safe-haven currency reduced following an announcement that Chinese Vice-Premier Liu He will meet Donald Trump at the White House for talks on Friday evening.

Meanwhile, the euro was buoyed on Thursday as the minutes from the European Central Bank’s (ECB) September policy meeting highlighted divisions in the bank over its decision to re-start bond-purchases.

What’s coming up?

In the absence of any economic data, Brexit will continue to dictate movement in the pound today.

Brexit Secretary Stephen Barclay will meet with the EU’s chief negotiator Michel Barnier this morning, with markets eager to see whether the EU shares in Varadkar’s optimism.

The US-China trade talks will also resume today, keeping markets on edge into the weekend.

The US consumer confidence figures will also be on the docket for USD investors, with an expected slide in household sentiment likely to drag on the US Dollar.

For EUR investors the focus will remain on the ECB, with a speech by President Luis de Guindos potentially shedding more light on the bank’s policy plans.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

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