The Pound rallied late on in yesterday's session after sources revealed progress in Brexit negotiations after the UK bowed to EU demands on the divorce bill in a move that could result in paying £50bn to Brussels, in an attempt to get France and Germany to agree to move negotiations to trade.
The ongoing and tense negotiations have led to a broad agreement by the UK to a gross financial settlement of £89bn on leaving the bloc, although the British expect the final net bill to be half as much. The news brings the two sides close to agreement on a key obstacle to opening talks on a future free trade pact.
A senior EU official told major news broadcasters that the UK appeared ready to honour its share of the EU’s unpaid bills, loans, pension and other liabilities accrued over 44 years of membership. The EU's demands include London paying a share of post-Brexit EU spending on commitments made before Britain leaves in March 2019 as well as funding of EU staff pensions for decades to come.
Sources confirmed that work was still continuing ahead of May’s talks with European Commission President Jean-Claude Juncker and his chief Brexit negotiator Michel Barnier. But EU diplomats briefed on progress said the British offer was promising and that, on the financial settlement, the two sides were, as one said, “close to a deal”.
The dollar rose against a basket of currencies on Tuesday, rebounding from a two-month low hit the previous day, as risk sentiment improved and the confirmation hearing of new Federal Reserve chair Jerome Powell kicked off.
Traders were also paying close attention to comments from Powell in his confirmation hearing before the U.S. Senate Banking Committee. The Fed should “respond decisively” to any new economic crisis, Powell said, positioning himself as an heir to the central bank policies of current chair Janet Yellen and her predecessor Ben Bernanke.
The prospects for a U.S. tax cut seemed to improve after Senate Republicans rammed forward their bill in a partisan committee vote that set up a full vote by the Senate as soon as Thursday, although details of the measure remained unsettled.
Republican leaders conceded that they have yet to round up the votes needed for passage in the Senate, where they hold a narrow 52-48 majority. Some analysts, however, did warn of the risks of unintended consequences if the package was passed.
13.30 – USD: Preliminary GDP QoQ; Forecast at 3.3% against a previous of 3.0%
14.00 – GBP: BOE Governor Mark Carney Speaks
15.00 – USD: FED Chair Yellen Testifies on the US economic outlook before the Joint Economic
Committee of Congress
15.30 – USD: Crude Oil Inventories