GBP/USD – Surging Pound Shrugs Off Soft Services PMI

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GBP/USD has started the week with solid gains. In Monday’s North American session, the pair is trading at 1.3022, up 0.40% on the day. On the release front, Services PMI dipped to 52.2, shy of the estimate of 53.4 points. In the U.S., ISM Non-Manufacturing PMI posted a strong gain of 60.3, above the estimate of 59.3 points. On Tuesday, the U.S. will release JOLTS Job Openings and all eyes will be on the U.S. midterm congressional elections.

The pound jumped 1.1% last week, and the positive trend has continued on Monday. Reports that the U.K and the European Union are closing in on an agreement over Brexit has boosted the currency, after showing losses in October. On Friday, David Lidington, a close adviser of Prime Minister May, said that the two sides were “very close to resolving” the dispute over the Irish border, one of the most vexing problems in the Brexit negotiations. May would like the EU to host a special Brexit summit this month, with an eye to signing a deal before the end of the year. However, the Europeans have not showed the same enthusiasm emanating from London, and they will likely want to see more concessions from May before agreeing to a Brexit summit.

The U.S economy continues to perform well, a fact that will be hammered home by President Trump and the Republicans in the few hours left until Election Day on Tuesday. The labor market is at or beyond capacity, and non-farm payrolls surged to 250 thousand, crushing the estimate of 194 thousand. Wage growth has also strengthened, with strong gains of 3.1% in the past year. Despite these strong numbers, the dollar failed to make headway on Friday, as reports that President Trump will present his Chinese counterpart with a trade deal proposal increased risk appetite and weighed on the greenback.