Temporary Relief for Pound Sterling as Barnier Hints he is Ready to Work on Irish Border Compromise

The Pound weakened further against the US Dollar and Euro Thursday after official data revealed a surprise contraction in UK retail sales during the June month.

HSBC say the Pound is around fair value reducing chances of further devaluation but any "slam dunk" news on Brexit to allow Pound to "burst through" current familiar ranges. GBP could rise versus EUR in very short-term as outlook for later deteriorates.

The tone adopted by Dominic Raab and Michel Barnier following their meeting to discuss ongoing Brexit negotiations could trigger moves in the Pound over coming hours and days. 

The Pound slumped against the US Dollar and Euro Wednesday after official data showed UK inflation surprising on the donwside in June, prompting fresh questions about whether the Bank of England will be able to raise its interest rate in August.

"Risks remain skewed" to the downside for Sterling we are told by analysts and we believe comments from EU negotiators Barnier and Raab present the next key hurdle for the UK currency.

The UK government bond yield curve is at its flattest since 2016 amid growing expectations the Bank of England (BOE) will raise interest rates and increasing Brexit uncertainty.

Official data shows the UK economy continues to create jobs at a robust pace with May seeing a record proportion of the population participating in the labour market. 

Sterling may catch a bid if Prime Minister Theresa May gets legislation through parliament in the face of opposition to her agenda by Jacob Rees-Mogg and other Conservative MPs who see her plans as a betrayal to Brexit voters.