Deal or dead end: How will Brexit play out?

Lincs County Council leader Martin Hill

Last week, the British pound ended the week sharply lower against the USA dollar.

GBP/EUR ultimately closed the week at the level of 1.1187 - still around half a cent below last week's opening levels.

Following a series of new lows, the pound is looking oversold in the short-term. It is ultimately putting a cap on the Pound's potential for gains against rivals.

While Brexit uncertainties are still weighing on Sterling, GBP/AUD was able to break away from last week's worst levels amid escalating tensions between the United States and China, currency jitters in Turkey and the RBA's more cautious tone on Australian inflation.

The Pound spent most of last week falling against most major rivals due to concerns that a "no deal" Brexit may be becoming more likely. "The tricky bit is coming to a common position that everyone can sign up to, but I'm confident that we should be able to achieve that."Another source said: "We are working to come up with a positive policy paper that will take a realistic approach outlining what is acceptable in line with the referendum result."In The Times today, the Conservative former cabinet minister Lord Lilley, who is a member of the ERG, writes that while a Canadian-style trade deal would be "the best outcome", no deal "would be a good second best"."The Chequers plan is moribund and the agreement offered by the European Union in March is unacceptable because the "Irish backstop" means splitting the United Kingdom", he writes".

Friday's UK Gross Domestic Product (GDP) growth report did little to change this.

Amid a lack of fresh drivers, concerns about how the Brexit process could impact Britain's economic outlook continued to keep pressure on Sterling on Monday.

While most recent Pound to Australian Dollar (GBP/AUD) exchange rate movement has been due to risk-sentiment and political news, slews of economic data from the United Kingdom and Australia are set to have an impact this week.

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As a result, the currency has been highly unappealing amid last week's rise in trade tensions between the USA and China, as well as the emerging currency crisis in Turkey.

With investors seeking safe havens, riskier currencies like the New Zealand Dollar have been sold. However, the rally may have ended last week as a series of global uncertainties and the latest Reserve Bank of Australia (RBA) developments provided cause for concern. This leaves a tricky scenario ahead for Bank of England, as they try to limit the downside in GBP due to inflation considerations.

Data on Tuesday showed British workers' wages rising at their slowest rate for nine months, up 2.4 percent annually, although there was also a surprise fall in the unemployment rate.

New Zealand's economic calendar will be a little quieter this week, so the Pound to New Zealand Dollar (GBP/NZD) exchange rate is more likely to be driven by United Kingdom data or political news in the coming sessions.

Final figures to look out for include Australia's employment figures and British retail sales stats.

United Kingdom inflation is forecast to have contracted slightly month-on-month, but the yearly figure is expected to have improved from 2.4% to 2.5%.

Turkey has seen surging inflation in recent months, but not higher interest rates to match. This could drag GBP/NZD lower.

Beyond weak trading conditions, the pound also remains weighed down by weak inflation data.

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