(MENAFN- DailyFX) GBPUSD talking points:
- Hopes are rising that the UK and the EU have reached agreement on a Brexit transition deal.
- The Bank of England will likely leave interest rates unchanged this week but could signal a rise as early as May.
- UK wage inflation data could also be constructive for GBP .
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British Pound uptrend likely to extend higher
GBP has plenty going for it this week and is well placed to make further gains. The first reason is Brexit, with reports emerging that a transition deal between the EU and the UK has been agreed. Member states' representatives are believed to have met in Brussels today and that gathering is reported to have been followed by a meeting between EU chief negotiation Michel Barnier and UK Brexit Secretary David Davis.
A news conference is planned for 1145 GMT at which a transition deal of around two years is expected to be announced as long as the Irish border question does not prevent one following a weekend of intensive talks between the two sides. A two-day EU summit will follow on Thursday and Friday.
Any such deal should benefit GBP/USD , which has been in an uptrend since the start of March and breached the psychologically important 1.40 level Monday.
GBPUSD Price Chart, Daily Timeframe (November 5, 2017 March 19, 2018)
Hawkish Bank of England?
Later this week the Bank of England's monetary policy committee meets and its announcement on Thursday is expected to reveal no change in its 0.5% bank rate, its £435 billion asset-purchase target or its £10 billion corporate bond target. However, it could pave the way for an increase in bank rate to 0.75% in May.
Higher average earnings?
Prior to that, on Wednesday, figures for average weekly earnings are forecast to reveal a rise to 2.6% from 2.5% three-months year/year in January, adding to the pressure on the central bank to tighten monetary policy.
GBP set to benefit
In due course, this could help lift GBPUSD towards the 1.4340 high touched on January 25, with good support at 1.3875 from the trendline joining the higher lows in place since the start of this month.
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--- Written by Martin Essex, Analyst and Editor
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