The strength of pound has been mixed versus its major currency counterparts this week, due to a busy week for political events in the UK and internationally too. For example, events worldwide include the USA’s and Iran’s military skirmish, while bush fires continue to consume millions of acres in Australia.
Looking at Great Britain, sterling has been affected as the UK’s vast services industry has shown signs of resilience. Also, in a meeting between Prime Minister Boris Johnson and new European Commission (EC) President Ursula von der Leyen this week, President der Leyen signalled a compromise approach to the UK/EU future trade talks.
The incumbent Bank of England (BoE) Governor Mark Carney delivered a downbeat speech this week. Mr. Carney noted that the BoE’s forecast recovery in UK economic growth isn’t “assured”, and so the Central Bank is considering cutting UK interest rates below their current 0.5%. This was weighed down sterling somewhat.
According to watchdog IHS Markit’s monthly Purchasing Managers’ Index (PMI), UK services reached 50.0, exactly the figure that separates economic growth from contraction, and above the previous “flash” estimate of 49.0. So this tells us that UK services held their ground last month, rather than contracting.
In part, it’s thought that the performance improved in December, following the Conservatives’ electoral win. If this trend continues in 2020, it could impact sterling’s value.
Sterling’s value was also influenced by the UK PM's and EC President's first meeting at Downing Street this week. In particular, President der Leyen said that elements of the trade deal can be prioritised, to meet PM Johnson’s deadline of finalising the trade talks by the end of 2020.
For the financial markets, this signals that the EU may take a consensual approach to the trade talks, which helps remove the risk of a new Brexit cliff edge which would occur if the UK and EU can’t make an agreement by the end of this year. In turn, President der Leyen’s comments have supported the pound in part.
The actual UK/EU trade talks won’t begin in earnest until March, according to reports. This is because the EU’s 27 member states must first agree a mandate to give to their Chief Brexit Negotiator, Michel Barnier. It’s thought that this will take several weeks, at which point the negotiations will begin properly.
Next week is packed with UK economic data. It’s forecast that UK Gross Domestic Product (GDP) was flat at 0.0% in November, while retail sales fell by 0.6% that month. New data above or below these results could affect sterling.
Absolutely brilliant service, in particular special thanks to Mr Daniel Wright, who literally took care of us throughout the whole process (we are both pensioners)… we entrusted our life savings to him, and don’t regret it one little bit, Daniel was incredible.
Daniel Wright was easy to deal with over the phone and very professional. It made the International transfer very quick and easy. I would definitely use them again and recommend to friends.
Daniel Wright at Foreign Currency Direct came highly recommended to us by a friend and he and the Company have lived up to this recommendation with every transaction they have completed for us.
It’s a tad daunting and scary to change currency with a hitherto unknown company, and I was worried about it beforehand. My fears were unfounded: I can assure you that this firm is genuine and does exactly what they say they will do. Daniel Wright is a pleasure to deal.
The company gave me great confidence. A complete novice, as I am, in moving large amounts of monies around, my wonderful account manager Daniel was calm and precise in explaining the process to me. He was flexible, informative, professional, friendly. If I can recommend him to anyone then I surely will.