It is fair to say yesterday was fairly volatile for those with a Sterling requirement: The Pound reached 2 week lows against the US Dollar and the Euro in the morning session before recovering to highs of 1.253 and 1.171 against the greenback and the single currency respectively by the end of the day. It seems the early negative Retail Sales data releases led investors to question the resilience of the UK economy with sales only rising by 0.1% in January against the 3.3% rise posted a year ago.
This was further compounded by the latest IFS report, suggesting that the UK’s aging population and limited economic growth over the next few years will drive the UK Tax burden to 30 year highs. With considerable cuts to NHS spending to come and a projected £17bn rise in taxes across the board, if investors were concerned about consumer confidence in the UK in the build up to Brexit, these latest releases would have done little to wet their appetite and the Pound struggled as a result. Chancellor Phillip Hammond is due to discuss this matter at the start of next month. It may be wise for those holding Sterling to act before these concerns begin to anchor Sterling’s value further.
Fortunately for those holding Sterling, the Bank of England’s Kristin Forbes offered some much-needed support to the Pound: By suggesting an interest rate hike should still be envisaged considering the reasonable levels of economic growth and the amount of “easy money” available in the market, Forbes helped draw back attention from investors who have been put on edge since the unanimous MPC vote to keep rates unchanged last week.
Consultants PwC may well have aided Sterling’s drive with their latest report stating the UK economy has the means to outperform it’s G7 counterparts in the long run. Despite a slowdown in growth in the years surrounding Brexit, the UK’s favourable demographic data and economic flexibility could make it one of the fastest growing economies between now and 2050. The report did clarify though that these positive releases where still very much dependant on the government’s ability to negotiate sustainable trade agreements in the aftermath of Brexit.
Last night, MP’s voted against the proposed “costly” and “undermining” amendments to the article 50 bill as the UK ready’s itself for negotiations in the build up to Brexit. The Government won by 33 votes paving the way for PM Theresa May to act on her promises mid-march. With Brexit minister David Jones promising MP’s will still get a “take it or leave it “ say from the resulting talks with the Eurozone, volatility in the markets should be expected.
Yesterday, the Government came under serious pressure as questions were raised over the UK’s “broken” Housing model. With a projected 250,000 new homes needed each year to respond to demand a white paper was issued empowering councils to push for construction and facilitating more family orientated tenancies. Real Estate is always a great barometer of the stability of a currency so the Government’s ability to for fill these promises will certainly have an effect on Sterling long-term. Short term, I expect the UK GDP, trade balance and manufacturing releases towards the end of the week to offer brief spikes in the market, why not open a free account here at FCD to make sure you can capitalise on them.
A busy finish to the week for Sterling with plenty of opportunities to take advantage of spikes in the market. Call our friendly team today on 01494 725 353 or email me at firstname.lastname@example.org if youd like to talk to someone regarding a transfer.
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