The British Pound (GBP) was the star of the show in the forex markets on Wednesday, on the back of surprise CPI data and renewed optimism in Brexit talks between the UK and the European Union.
At the time of writing, the GBP/USD is up 1.68%, heading for its single biggest daily gain since March this year.
Driving the surge is renewed optimism of a Brexit deal between the UK and the EU after Brexit talks are formally set to reconvene with the schedule of reaching a deal by mid-November. Calls between London and Brussels, and its two chief negotiators – Lord David Frost and Michel Barnier – have gathered momentum this week, as a path is sought to reignite talks quickly.
Earlier in the week, Barnier said of the renewed negotiations:
“if we are both ready to work constructively and in a spirit of compromise over the next days, on the basis of legal texts. Time is short.”
The mood between the two parties has changed since last week when Prime Minister Boris Johnson told the nation to prepare for a no-trade-deal Brexit. This came after EU leaders refused to cede ground nor agree to speeding up the pace of negotiations.
A spokesperson for the British government said:
“It is clear that significant gaps remain between our positions in the most difficult areas but we are ready, with the EU, to see if it is possible to bridge them in intensive talks,”
UK CPI Figures
Providing a boost to the British Pound (GBP) was the UK’s inflation rate which rose to 0.5% in September, from 0.2% the previous month. Market expectations were for a 0.4% increase.
The rise in the UK’s inflation rate, which tracks the prices of goods and services, was attributed to the end of cheaper restaurant meals which pushed up UK prices in September after the Eat Out to Help Out scheme ended.
Catering services saw prices rise by 4.1% between August and September 2020, compared with an increase of just 0.2% from the same period a year earlier.
