Sterling’s impressive run continued during yesterday’s trading, with the Pound gaining further value against the Euro, US Dollar and the Canadian Dollar. The table below shows the market movements for GBP/EUR, GBP/USD and GBP/CAD during the last month:
|Currency Pair||% Change||Difference on £200,000|
The catalyst for the Pound's improvement was reports earlier in the week, which confirmed that the UK and the EU have all but agreed on the terms for a Brexit transitional deal.
This helped to drive investor confidence higher following weeks of stagnation, with any progress in this sphere always likely to help facilitate a rise in the Pound’s value.
It also helped to alleviate concerns that the UK was going to be left in a state of economic limbo, following our separation from the EU and as such investor confidence surged and Sterling’s value has so far mirrored this.
This positive trend was further accentuated on Wednesday following the latest UK Unemployment figures, which came out better than expected at 4.3%, with average earnings also rising by 2.8%. Due to average wages aligning almost directly with inflation figures, the markets started to factor in a prospective interest rate hike, which according to many analysts opinions would be in line with the figures released.
The UK may have had to give up a lot in order to move Brexit talks forward, details of this may become clearer over the coming weeks.
Yesterday’s Bank of England (BoE) interest rate decision and subsequent monetary policy statement took on even greater significance than usual and the markets reacted accordingly. Despite the central bank keeping rates on hold at 0.5%, two members of the BoE voted in favour of a rate hike this month.
Despite the vote being 7-2 against, it is now far more likely that the central bank will raise rates over the coming months. This is even more poignant when you consider BoE governor Mark Carney’s comments regarding the subject, which were bullish and based on an improved economic performance by the UK.
The run of good data this week also included UK Retail Sales figures, which were released yesterday morning. These monthly figures came out at 0.8%, which was well above the markets predicted figure of 0.4%. There was also an annual increase to 1.5%, so overall it has certainly been a positive week for UK economic data, with the Pound finding support across the board.
However, a word of caution must be heeded to those clients holding Sterling, as this is not the first time the pound has threatened to make significant inroads against the other major currencies. Despite the fact there may be more substance to the recent increase in value, there are still many unanswered question, in terms of how the UK economy will be shaped and perform when it goes it alone.
At a first glance, it seems as though the UK have had to give up a lot of ground to the EU in order to move talks forward, details of which will become clearer over the coming weeks.
If the UK is under heavy restrictions during the transitional period, then this could restrict economic growth and opportunities for UK businesses and this in turn would likely heap pressure back on the Pound.
With the next phase of Brexit talks underway today, be prepared for further fluctuations in Sterling’s value, with yesterday’s positive trend cooling by the close of European trading.
As such, it may be worth taking advantage of the current improvement for the Pound, with no guarantees that the current trend will continue over the coming days.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me directly at email@example.com.
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