Summary:

• UK PM May says she will take control on Brexit negotiations
• GBP making steady gains on the news
• GBPUSD back near highest level in a week around 1.3160

News making the headlines this afternoon that UK PM Theresa May will take control of Brexit negotiations has given the pound a bit of a lift, with sterling moving to its highest levels of the day shortly afterwards. In a statement, May said that she will lead negotiations with the EU while the Brexit department will instead focus on preparations for a no-deal Brexit.  

 GBPUSD has moved back to test prior resistance around the 61.8% of the last leg lower at 1.3160. Source: xStation

The big picture for the pound remains far from clear, with Brexit uncertainty continuing to loom large over sterling. Next week’s BOE meeting is a potentially major event for the currency with markets still expecting Carney and his fellow MPC members to deliver what would be only the 2nd interest rate hike in a decade, despite some recent soft data. The GBPUSD pair has found some support in recent trade above 1.2960 but it will need some further positives before any sizable recovery can occur. 

 GBPUSD has bounced from a longer term support zone around 1.2960 but the market remains not far from its lowest level of the year. Source: xStation

When looking at the GBPUSD it is also important to not forget the other side of the cross, with the USD appreciation responsible for a fair amount of the declines seen in recent months. This afternoon there’s been some noteworthy comments from the IMF on the USD, with some “staff” estimates projecting that the US dollar is overvalued by 8-16%. The fund says this overvaluation is compared to levels “warranted by medium-term fundamentals”.