Analysts at BBH note that the EU's leading negotiator whipsawed sterling yesterday and the net effect was to ease fears that the UK would leave the EU without the agreement.
“Initial concerns that the negotiations had stalled sent sterling to nearly $1.3120.”
“The willingness to discuss a two-year transition period spurred sterling's recovery. After trading on both sides of Wednesday’s range, it closed on its highs. This was a bullish technical signal and there has been follow-through buying today. It is approaching the 50% retracement of the decline since late September. It is found near $1.3345, which also corresponds to the 20-day moving average. Next week, the UK reports September CPI, retail sales, and labor market data. The market is pricing around a 75% chance of a rate hike next month and next week's data will impact the expectations.”
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