The pound continues to tear higher against the US dollar, with the pairing now striking a one-month high.
Initial gains this morning are largely a result of lingering Brexit optimism following comments from the EU’s chief negotiator Michel Barnier on Monday.
Speaking yesterday, Mr Barnier appeared upbeat about the possibility of the UK and EU reaching a deal by November.
He said: “If we are realistic, we are able to reach an agreement on the first stage of the negotiation, which is the Brexit treaty, within six or eight weeks.”
These gains have been further shored up today by the release of the UK’s latest wage figures.
According to data published by the Office for National Statistics (ONS), UK workers enjoyed a surprise bump in wages in July, with wage growth unexpectedly climbing from 2.4 per cent to 2.6 per cent.
This kept wages just ahead of inflation in July and prevents UK workers from facing a drop in real pay.
At the same time the US dollar faces some broad-based weakness this morning as investors appear willing to try their luck with riskier high-yield assets.
This comes in the wake of reports that North Korea’s Kim Jong-un has asked for a second summit with President Donald Trump, helping to defuse tensions in Asia and prompting markets to go risk-on.
This in turn has led to some profit taking by US dollar traders after geopolitical jitters helped the currency go higher in recent weeks due to surging demand for safe haven currencies.
Looking ahead, the pound US dollar exchange rate may face some hurdles later in the week as the Bank of England (BoE) concludes its latest policy meeting on Thursday.
With the BoE having voted to raise interest rates just last month, markets are not expecting any major policy decisions to be announced this week.
Instead the focus is likely to be on policymakers’ economic outlook, something which could prompt some weakness in the pound if they continue to raise concerns of a no-deal Brexit.
Meanwhile the US will publish its latest CPI figures on Thursday, with the US dollar potentially strengthening if another robust inflation reading helps to further bolster Federal Reserve rate hike expectations.