Summary:

• GBP trading higher on the day with GBPUSD back above 1.34
• Governor Carney testifies before parliamentary committee
• IMF says Brexit uncertainty hurting UK economy

It’s been quite a busy day for the UK in terms of news flow with several developments surrounding Brexit, comments from the IMF and Chancellor Hammond on the UK economy and also BoE Governor Carney testifying before a parliamentary committee. Whilst there hasn’t been any major shocks form any of these events, the Pound on the whole seems to have responded positively and is gaining against most of its peers on the day.

GBP is making steady gains today with CAD the only major currency that is appreciating more. Source: xStation

This morning saw a lot of talk surrounding the UK, with Brussels saying that a “transition period” after the country leaves the EU should not continue beyond 31 December 2020. The has said the temporary arrangement should last for about two years after Brexit in March 2019. Elsewhere the IMF said that Britain’s vote to leave the EU is already damaging the UK. The annual report on the UK economy also warns that the losses in tax revenues could exceed any gains from ending the net contributions to Brussels post-Brexit.

Growth rates in the UK have declined this year in stark contrast to the increases seen in Europe, the US and Japan and the IMF attribute the bulk of the blame on the decision to leave the EU. The fall in the Pound as a result of the referendum has contributed to gains from higher exports, but this fails to offset the negative consequences according to the fund, with GDP growth of around 1.6% this year coming in almost a full percentage point below the forecast prior to the Brexit vote.

At the time of writing BoE Governor Carney is speaking to parliament and he has said that an early agreement on Brexit transition rules is needed. Other interesting comments from Carney are as follows:

• Will review bank supervision based on Brexit progress
• We now have a banking system that has 16.5% of Tier 1 capital
• Most pre-conditions in place for UK-EU free trade in financial services after Brexit; still need dispute resolution system
• Does not accept that because financial services free trade hasn’t been done in the past, can’t be done in the future

The GBPUSD has moved back above the 1.34 level once more today to trade back near its highest level of the week. Price is now testing a falling trendline from the high seen at the end of last month which currently lies around 1.3418. A break above here could see a move higher into year-end but a failure to move through the trendline could see the market return to test prior swing support at 1.33.

 The GBPUSD is near its highest level of the week and testing potential resistance around 1.3418. Source: xStation