Sterling had made some ground this morning following positive Brexit updates, increased bets on nearer BoE rate hikes and an upbeat market mood.
Yesterday the EU released their plans to help alleviate the pressure on the movement of goods into Northern Ireland from Great Britain. Part of the Brexit deal – the Northern Ireland Protocol – which aimed to prevent checks on the border between Northern Ireland and the Republic of Ireland, has been causing major problems and the UK have been pushing for a whole new protocol. The EU, however, are proposing amendments to the existing one and their latest proposals aim to cut the number of spot checks by 80% and also cut the customs paperwork by 50%. This has been seen as a positive step towards reaching a solution over the matter and they will now hold talks to further discuss.
The Pound has also been supported by rising bets on nearer-term rate hikes from the Bank of England. Communications from BoE policymakers over the weekend suggest that rates might be lifted before the end of this year as inflation continues to rise.
As a result, the GBP/EUR has pushed up nearly 1-cent from this week’s low and now trades at a 2-month high (but close to the highest levels since February 2020). The GBP/USD has gained 1% since Tuesday and now trades around a 3-week high.
