The pound strengthened throughout the course of yesterday against the euro to the highest levels in 10 days, with GBP/EUR Interbank levels breaking through 1.09, after some unexpected positive economic data was released from the UK.
The Office of National Statistics’ Retail Sales figures rose in July by 0.2% to 0.9% which beat economist’s predictions of a -0.2% fall. Year on Year figures also showed an improvement of 3.3% in July 2019 compared to July 2018. This may have been helped by wages growing at the fastest pace in 11 years, helping consumers to increase their spending patterns, along with a pickup in Inflation in July noted on Wednesday. Online purchases were one of the areas which noticed the biggest improvement.
Labour Leader Jeremy Corbyn yesterday called upon MP’s to back a motion of no confidence in the Government. Corbyn has written to leaders from opposition parties and Conservative party rebels to urge them to select him as a ‘Caretaker PM’ in an attempt to try and prevent a no-deal Brexit. If a vote of no confidence is won, Corbyn outlined plans to delay Brexit, call a snap election and set out campaigns for a second referendum. Not all MP’s were happy about Corbyn’s plans however, with Liberal Democrat Leader Jo Swinson confirming that she would not back plans to make Jeremy Corbyn Prime Minister, as he is not a Leader ‘respected on both sides of the House’.
Corbyn would require two thirds of MP’s to support him in a no-confidence vote, however if won Labour would call for a second referendum including the option to remain in the EU. A no-deal Brexit, snap election or second referendum could all create volatility for sterling exchange rates, however it is difficult to say which of these options would be taken more positively by markets.
UK economic data releases for the next week are relatively light. Brexit updates may continue to be the main driver for sterling exchange rates. For up to date information on the latest Brexit related developments, you may wish to contact your Account Manager here at Foreign Currency Direct.
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