The UK has found no clear direction following its decision to leave the EU, and with rumors that Article 50 could be invoked as early as March 2017, the Pound has suffered from further losses.
We are now 3 months from the Brexit vote and no closer to having any real idea about what Brexit means. Sterling suffered last week with Boris Johnson stating Article 50, the legal mechanism for leaving the EU, should be invoked early next year. There has actually been lots of positive news with UK car production at a 14 year high and the ONS (Office for National Statistics) stating there has been no major impact on the UK economy since the vote. The worst predictions of economic doom and gloom have clearly not materialised, but for every good piece of good news there is also bad.
The Federation of Small business revealed that small business confidence had fallen to a 4 year low. With SME’s making up 99% of business in the UK these views and attitudes will be key to shaping confidence in the future.
This week sees fairly limited data of major consequence and I feel sterling will be guided by events elsewhere and market sentiment. Mortgage Approval data for August this morning will give us a guide to the performance of the housing market, mixed messages have been seen here too following the Brexit vote. It does appear the housing market has so far shrugged off the major concerns with no major falls.
The eagerly anticipated Presidential debate airs early tomorrow morning at 1.45 am on Channel 4. The one and a half hour debate could easily upset GBPUSD rates which may impact the Pound against other currencies. We saw this last week where GBPUSD fell ahead of the US interest rate decision.
This is turn saw the Pound fall against most other currencies. The US election is very much a big risk event on financial markets and one that will become more and more important for sterling not just ahead of the vote on November 8th but also beyond.
Friday is the latest UK GDP (Gross Domestic Product) numbers which will confirm the final revision for Q2 GDP, currently at 0.6%. In the absence of anything new and fresh sterling might find itself traded more on sentiment than any concrete data.
The Bank of England have hinted at further interest rate cuts and economic data seems bound to come under pressure from the falls in many of the confidence surveys. I think it is far too soon to call a bottom yet for the Pound and there could well be further losses to come.
Wolfgang Schauble, the German Finance Minister has made clear that the UK cannot pick and choose which parts of the EU it wants to adhere to. It has also been made clear to the UK no negotiations will start until Article 50 is triggered, torpedoing ideas of any back alley deal.
This leads me to think the next few months will be more of the same with growing speculation as to what might happen but little clarity. The lack of a clear picture of what Brexit means will do little to help the Pound.
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