Sterling climbs to multi-month highs

Over the course of this week Sterling has been on the climb, gaining 1½ cents against the Euro and nearly 2 cents against the US Dollar since Tuesday. The reason for this gain has been due to an update on the Brexit timescales as the fears of the Brexit impacting the UK economy are diminishing. GBP/EUR rates now sit close to a 3 month high and GBP/USD only 1 cent off a 4-month high.

Brexit update – it is not as bad as feared

As well as Parliament now voting on the Brexit path moving forward, it was also confirmed that Parliament would get to vote on the final agreement that is put forward following the negotiation. This helped further strengthen the Pound s value as it suggests that the market will get more visibility on what the deal will look like. The fear remains that once Article 50 is triggered the Government will be very closed on the details of the deal being negotiated which would scare away investment in UK PLC and therefore weaken the Pound.

This remains a considerable risk and is the biggest reason why I think Sterling is going to struggle to climb in significant value in the coming 6 weeks until this question is answered.

There seems to be a perception that as the Government continues down the path to the Brexit goal that there will be less surprises and more certainty. Yes, there are risks which remain however the scale of the ‘threat’ to Sterling that it poses is reducing. As a result Sterling may well continue to gain strength as the Brexit ‘Project Fear starts to stale. Fundamentally, the actual performance of UK PLC since the vote has not been impacted as much as initially feared, as indeed the UK leaving the EU has not started a Lehman-style collapse in confidence like the financial crash nearly 10 years ago.

UK GDP figures to drive Sterling

Over the next week the biggest expected movement for the value of the Pound is likely to come later today. This morning we have UK Manufacturing and Industrial Productivity figures followed by UK GDP forecast figures this afternoon. All three releases are expected to come out strong for the Pound as its weakness over the last 6 months has increased business activity. There is a fear in the months ahead that the already record high levels of inflation being seen in the UK will continue, I expect today’s releases to generally overlook this longer term concern.

GDP figures released at 15:00 this afternoon I expect to have the biggest impact. The question however is, when will we see the best levels though?

Personally I am of a view that this expected positive news has already been factored into the market. Therefore there is a good argument to say that levels before this release will give clients the best levels. All should consider the risk against reward in trading over this even as many expect rates to either climb a little if the forecasts or confirmed or fall steeply if they are missed.

There is more potential downside than there is gain from Brexit. As a result, if you are in a position to buy in the coming weeks, today is a very keen day to speak to your trader. Call us on 01494 725 353 or email me at hse@currencies.co.uk and Ill be happy to reply personally.

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