This uptick comes as Boris Johnson meets with French President Emmanuel Macron in Paris. GBP investors seized on comments made in a joint Q&A held in front of the Élysée Palace in which Mr Macron appeared to show unexpected flexibility over the Irish backstop issue. Echoing comments made by German Chancellor Angela Merkel yesterday, Mr Macron said a solution to the backstop could be found within 30 days “if there is good will on both sides”.
The Sterling upswing suggests investors interpret the French President’s remarks as a softening of Europe’s stance on Brexit and the possible curbing of a no-deal outcome.
On the other hand, the realities of the 30-day challenge may be very different. Mr Macron played down the idea of a new timetable, stating the backstop remains “indispensable” and arguing the UK government must offer “visibility”.
Analysts suggest there is little chance of a workable alternative being found within this time frame. More cynical assessments suggest the offer may be an effort by Berlin and Paris to evade the blame for a no-deal Brexit.
In the continued absence of economic data, expect to see the pound remain highly sensitive to further Brexit developments.
Meanwhile, the US dollar remained resilient in broader trade this afternoon as we head into the Federal Reserve’s annual Jackson Hole Symposium and some hawkish commentary from a sitting member of the Federal Open Market Committee (FOMC).
In an interview with Bloomberg, Kansas City Fed President, Esther George said she disagreed with the central bank’s latest rate cut.
‘It’s not the time for accommodation, labour market remains strong, Businesses are still reporting issues finding workers, we are seeing higher wages.’
Still to come this week is Fed Chair Jerome Powell’s key speech which is expected to offer greater insight into the bank’s policy outlook, with any hint of further cuts potentially driving the US dollar down.
Despite the latest FOMC minutes indicating minimal appetite for further easing, economists still widely anticipate another rate cut in September.