GBP/USD pushed beyond 1.3450 after day of Brexit deal speculation

• GBP/USD has recently pushed above the 1.3450 level and onto fresh daily/weekly highs.
• Fervent speculation in Westminster that a Brexit deal is close appeared to boost sterling.

GBP/USD has put in a solid performance thus far on Tuesday, with GBP the best G10 performer on the day, amid a day of fervent speculation regarding the prospect for an imminent Brexit deal. The pair has recently crossed above the 1.3450 mark to set fresh daily and weekly highs, with bulls having bought a brief dip towards 1.3400 earlier in the session, and trades with gains of nearly 140 pips or over 1% going into the Tuesday FX close. 

GBP boosted by fervent Brexit deal speculation

GBP/USD was sent shooting above the 1.3400 level late in the European session on speculation in Westminster (mostly amongst Conservative MPs) that a Brexit deal is close and might be voted on in the House of Commons next Monday and Tuesday. Though the speculation appears to have contributed to lasting upside for the pair, Westminster MPs appear to be getting ahead of themselves; reports from a range of major UK news outlets, having seemingly reached out to their contacts in Brussels for confirmation, played down any optimism, with one quoting their EU diplomatic source as saying “we are not there yet by any stretch of the imagination”.

Even if Westminster speculation was misplaced, EU officials have come across as more positive regarding the state of negotiations on Tuesday; earlier on in the day, a German envoy to the EU was reported as saying it is still possible to reach a deal by end of the week and the Irish Foreign Minister Simon Coveney said he believes the two sides are seeing progress.

The general risk-on tone of the market amid growing hopes that lawmakers in Congress will be able to agree on a fiscal stimulus package is likely to also have helped; USD is lower against pretty much all of its major counterparts amid a lack of demand for safe-haven assets as US equities and crude oil markets have rallied.

Moreover, a few positive stories regarding post-Brexit plans to boost the UK economy being reported by the FT might also be helping; the first story suggested that the UK Treasury is moving ahead with tax reforms that would boost the City of London’s appeal to private equity and infrastructure funds, and the second alleged that the UK is devising plans to turn London into a shipping hub that would be able to rival Singapore by reforming tonnage taxation.

Looking ahead for GBP, while Brexit will remain the dominant considerations, Consumer Price Inflation numbers for November will be released on Wednesday morning at 07:00GMT and ought to momentarily distract attention. The Bank of England then meets on Thursday, though the meeting is unlikely to be too excited given how Brexit uncertainty leaves the bank with its hands tied. Thereafter, November Retail Sales numbers for November will be released early on during Friday’s European session and will also be of note.