Sterling has made some small gains vs both the Euro and the US Dollar recently but is still being affected by what is happening with the Brexit talks.
The next obstacle will be when the House of Lords looks at the proposal and if they approve it we could see Sterling make some gains vs all major currencies. However, further delay is likely to lead to Sterling weakness.
As yet until we get some certainty and clarity on the situation Sterling will find it difficult to make any significant gains against its major currency pairs even though UK economic data has been relatively strong recently.
Later this morning we eagerly anticipate UK inflation data at 930am. The expectation is for 1.9% so anything higher could see the Pound make some gains as it could influence the Bank of England to look at interest rates again when they meet next month.
Clearly there is little to no appetite to change interest rates in the short term but if inflation continues to rise in the longer term then an interest rate change could come in the next few months.
UK unemployment is due out on Wednesday morning and with levels hitting 4.8% which is the lowest in years it highlights how well the UK economy is performing even when you consider the so called uncertainty caused by the Brexit vote last June.
However, what is clear is that the political landscape in the UK is having the greatest impact on Sterling exchange rates and I think in the short term Sterling will struggle to make significant gains vs the Euro and US Dollar.
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