uploads/2018/03/6-12.jpg

Why the British Pound Could Struggle before the Brussels Meeting

By

Updated

British pound posts minor gains

The British pound (FXB) appreciated 0.32% against the US dollar (UUP) in the week ended March 9, 2018. The pound (GBB) closed the week at 1.39 compared to its close of 1.38 in the previous week. 

The economic data released from the United Kingdom in the week indicated that the UK economy has been accelerating. Reports indicated that the region’s industrial production and service sector activities have improved since the beginning of 2018.

Uncertainty surrounding Brexit negotiations has dampened the demand for the British pound, especially as we approach the next key Brexit date of March 22, 2018, when the spotlight will move to Brussels, where EU (European Union) leaders will meet to sign a transition Brexit deal.

British equity markets (BWX) managed to piggyback the global rebound in risk assets and close higher last week. The FTSE 100 Index (EWU) rose 2.2% in the week ended March 9 and closed at 7,224.51.

Speculators decrease bullish positions

As per the latest Commitments of Traders (or COT) report released on March 9 by the Chicago Futures Trading Commission (or CFTC), speculators decreased their overall bullish positions by 7,423 contracts in the previous week. The number of total outstanding net long contracts decreased from 13,000 contracts to 5,264 contracts.

The week ahead for the British pound

This week, there will be no major events or economic data releases from the United Kingdom. Traders are likely to remain focused on Brexit negotiations, as no progress has been made with respect to the trade negotiations between the EU and the United Kingdom regarding customs and the Irish border. Any improvements in the disagreements between the involved parties could help the British pound push higher.

More From Market Realist