We expect the pound to trade a volatile path over the next 36 hours as Theresa May presents the Brexit treaty to her cabinet. The outcome of Brexit depends on Theresa May’s ability to win support. Signs that she is able to draw her cabinet together behind her and the Brexit deal could see sterling push through $1.30 before opening the door to $1.3150. Failure by May to get the Brexit deal through could see sterling dive back towards $1.27 resistance tested at the end of October.
With so much attention on Brexit, traders are only expected to give UK jobs data on Tuesday a brief glance, even though UK average weekly earnings are expected to ramp up to 3% for the three months to September. This would be a solid increase from 2.7% the previous month.
Global Equities Drop, Dollar Soars
The weaker pound was offering some support to the FTSE, which although in the red was faring better than its European counterparts. Gains in resources stocks were eventually overshadowed by a general global weakness in sentiment which was then aggravated further by a softer open on Wall Street. A rally in the price of oil as Saudi Arabia fuelled hopes of a supply cut lifted energy stocks on both sides of the Atlantic. However, weakness in US tech stocks, lingering concerns over trade plus a stronger dollar ensured the Dow, the S&P and the Nasdaq were all on the back foot at the start of the week.
The dollar hit a high of $97.58, its highest level since June last year. The dollar also surged to a one year high versus the euro, as Italy prepares to resubmit its spending plans to Brussels.