FX round-up: Traders forced to cover shorts as May packs bags for Strasbourg
News that the Prime Minister might be headed to Strasbourg for a last-ditch attempt to win concessions from Brussels saw skittish FX traders forced into pushing the pound higher.
As of 2104 GMT, Sterling was 0.9% stronger against the single currency at 1.1689, having earlier hit an intraday high of 1.1719.
It also managed a hefty bounce against the Greenback, adding 1.02% to 1.3153.
Going into the week however, the set-up had appeared to be exactly the opposite, with political analysts remaining very divided as to what the end-game of this current first phase of the Brexit negotiations would be.
The whole range of options appeared to still be very much in play, including a 'no deal' Brexit, a second referendum and perhaps even a leadership contest for the Tory party.
Faced with that uncertainty, at the start of trading, traders had initially pushed the pound to an intraday low of 1.1526.
Indeed, ahead of Tuesday's second 'meaningful' vote in Parliament on May's withdrawal proposal, it remained to be seen just what exactly May had - or had not - managed to agree with Brussels overnight and what counsel the Attorney General would provide to the government.
Hence, as of Monday evening no scenario could apparently be dismissed outright, including another round of 'kicking the can down the road'.
In the background meanwhile, the US dollar spot index was at its lowest ebb of the session, off by 0.14% to 97.1710, as economists marked down their forecasts for first quarter GDP in the wake of retail sales figures for January and the revisions to December's data contained in the same report, with economists at Barclays going from 2.5% to 2.0%.
Commenting on the retail sales numbers, Andrew Hunter at Capital Economics said: "With the fiscal boost fading and the Fed's prior tightening becoming a more serious drag, we continue to think the Fed’s next move will be to start cutting rates in early 2020."
To take note of, on Monday analysts from multiple investment banks, including at JP Morgan, Morgan Stanley and Bank of America-Merrill Lynch all sounded a positive note on the global economic outlook in the back half of 2019.
Specifically, those at the latter told clients: "The USD has remained surprisingly strong in the face of the two-month long risk rally and narrowed rate differential.
"We suspect this reflects increased pessimism about the US economy as investors are using the USD as a hedge against or an outright play on the next recession."
Trading in the other major currency pairs was quite staid, with euro/usd up 0.11% to 1.12455 and US dollar/yen ahead by 0.07% to 111.2120.
To take note of in the case of the latter, according to Commodity Futures Trading Commission, over the week ending on 5 March, the number of net shorts on the euro stood at 78,166 contracts - the most since December 2016.