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Sterling soars as Brexit optimism builds

Will last-minute assurances on the Irish backstop be enough to get May's Brexit deal through Parliament tonight?

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Sterling soared against its major peers last night, 11 March following the news Theresa May and Jean-Claude Juncker agreed legally binding assurance on the Irish backstop. At one point, the UK currency reached $1.3285 and €1.1785.

The changes, which will prevent the backstop from becoming permanent, may be enough to convince Eurosceptic Tory MPs and the Democratic Unionist Party (DUP) to vote for the UK prime minister’s withdrawal agreement this evening in Parliament.

The European Commission president said, “In politics sometimes you get a second chance, there will be no third chance. It is this deal or Brexit might not happen at all.”

Aside from Brexit, focus will also be on US inflation data due for release at 12:30 (GMT). As the Federal Reserve (Fed) has been holding firm to its wait-and-see approach to interest rate increases, Consumer Price Index (CPI) data today could signal that inflationary pressures may be building under the surface as prices on core goods and services have been rising sharply as of late. The month-on-month figure for February is likely to show an increase from 0 per cent to 0.2 per cent, which is something to be expected with the still booming US labour market and rising wages.

However, markets will remain sensitive to Brexit developments as UK Attorney General Geoffrey Cox will give his final advice this afternoon ahead of the meaningful vote this evening.

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