- GBP the best performer in G10
- Currency rising across the board after notable drop last week
- GBPJPY retests key breakout level
The pound is the best performer of all amongst the G10 currencies today, as the next round of UK-EU Brexit negotiations begins. This is now the 5th round of talks and little by the way of progress has been made, and business leaders in the UK are becoming increasingly tetchy at the slow progress.
The GBP is rising across the board today. Source: xStation
Last week was the worst this year for the pound as some softer data as well as mounting political pressure on PM May saw the currency slide after what had been a stellar rise in September. PM may had intended to use the Conservative party conference to galvanise the government and rally her support in what was seen as a her first major speech directed at her party’s members since the disastrous general election in June.
Despite the pressures mounting both within her ow n party and abroad, Theresa May seems to be holding on for now and barring any whilst there remains plenty of scope for negative political shocks, the government seems to be fighting them off for now. From an economic perspective last week saw worse than expected manufacturing and construction PMIs, but the services equivalent (which accounts for around 80% of GDP) remains robust.
UK labour costs have been revised higher which could be seen as positive for the pound. Source: Office for National Statistics
Further supportive of the pound is a rise in labour-cost pressures, which according to recent data is increasing faster than the Bank of England anticipated. The Office for National Statistics said earlier today that annual growth in unit labour costs was 2.4% in the second quarter – a marked increase on the 1.6% published last week after an error was found in the data. The increase comes after the first quarter saw this metric jump higher at its fastest rate in almost four years in rising by 3.5%.
The GBPJPY had retraced to the prior breakout level from 146.92-147.70. This could nnow be seen as key support. Source: xStation
The GBPJPY pair has fallen to an interesting level, with the cross trading back around where it broke higher from last month. The zone from 146.92-147.70 had acted as resistance on several previous occasions before a strong break above here in the middle of last month led to a potentially major breakout. Price has now revisited this zone and this region could be seen as pivotal going forward. As long as price remains above 146.92 then the breakout remains valid and further gains could lie ahead. However, a failure to hold above this level would see the move higher classed as a possible false breakout and the market may then fall back into its prior range.