Sterling's value continues to be driven by Brexit updates and I don’t expect that to change moving forward. Currently after the PM released her 'plan B' on Monday the negotiation path going forward seems to have become a little clearer. Most now expect next week’s debate and votes to consist of a number of scenarios with regards to the outstanding points in Westminster. The aim of which would be to define the deal which the UK Government would accept, which could then be put forward to Brussels as some sort of ultimatum. Bear in mind as the Government continues to negotiate I expect the threat of a no-deal to return as in that scenario the UK would not pay the 'divorce bill' of nearly £50 billion.
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If the above was to take place the impact on Sterling's value could be significant. I can see a further round of intense uncertainty about the deal which the UK will leave with, which would in turn likely bring with it a period of Sterling weakness.
Currently PM May is back in Europe meeting counter-parties across the EU trying to find some kind of improvement from the current deal.
However, with a record loss in Government of over 200 votes any concessions given are unlikely to result in a deal being broken in the immediate future, I think.
In the near-term economic data has been driving Sterling's value. Recently UK inflation fell to 2.1% in December which was its lowest level in two years. Yesterday UK jobless data was released and also showed an improving picture for the UK economy, with now over 32.5 million people in work, the highest since records began. These helped the value of the Pound climb in value during trading yesterday, re-visiting the highest level seen in nearly 2 months against the Euro, and within a cent of the highest GBPUSD level seen since November.
Yesterday had the latest update from Government on borrowing figures. These climbed by more than £3 billion over expected for the month of December.
This had little impact on the market as against UK total debt of over £1,78 trillion or 86% of GDP it is a small amount.
Next on the economic horizon for the Pound is housing data released on Friday. The historical corner stone of the UK economy has been under some considerable pressures recently with most first-time buyers expecting a fall in prices due to Brexit, this has in turn resulted in a slowdown in activity and stagnant market place as many home owners have decided to 'improve, not move'. This data is expected to confirm this and show a further fall in mortgage approvals which I expect to result in the Pound losing value as we end the week.
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