The Pound enjoyed new two month highs yesterday. Profit seeking activities fuelling the currency markets before the close of play each weekend has seen high street traders scrambling to move their profits into more stable currencies, allowing them to leave their desks with peace of mind before the weekend. Sterling, for very obvious reasons, is near the bottom of this list of stable currencies, so despite the recent improvements, the Pound experienced a heavy period of sell-offs ahead of the weekend as traders seek to protect themselves by relieving their portfolio of Sterling.

Traditionally, well, at least since the Referendum vote, the losses recorded on the Friday are reversed to some degree on the Monday with the resumption of normal market activity. The mountain of cheap Sterling created before the weekend is bought back in earnest which is what was seen yesterday morning when GBP/EUR climbed back above and settled in the high 1.16s by midday.

May’s hints suggest she is caving to Parliamentary opinion

One key feature mentioned by Theresa May yesterday at the CBI conference was very pertinent to anyone looking to buy or sell Sterling for an upcoming or future currency requirement.

Firstly, the idea of a temporary agreement to run beyond the two year deadline once Article 50 was hinted at by May. This interim agreement, which was also pointed to by a Cabinet Minister, was becoming an obvious ‘reality check’ given the size of the task involved in instigating a Brexit.

Clearly from the market reaction, the consensus is that the UK will have a guarantee to remain a part of the single market for a little bit longer. As we have seen in the past any confirmation of a continuation of the status quo for a longer period plays well for the Pound’s value.

Will the Autumn Statement scupper this rally for the Pound?

Tomorrow is the main red flag for anyone holding Sterling before the end of the month. The Autumn Statement will detail to the marketplace the specifics of the heavy borrowing Philip Hammond has explicitly hinted at since the beginning of November.

The specifics markets are waiting for are the degree to which the government is abandoning its commitment to get rid of the deficit by 2020, and just how much they expect tax receipts to be cut by over the course of the next year with the impact of the Leave vote on the UK economy. Growth forecasts have already diminished, but this statement will be the first opportunity for the government to detail how this will impact their plans to, and their need to, borrow.

Any suggestions of lower than expected tax receipts will likely spook some of the recent investors brought back to the Pound. Given the potential for a slide Euro and Dollar buyers may be wise to seize the recent and hefty gains over the last couple of weeks given the unknown factor tomorrow.

The Pounds rally could come to an abrupt end following tomorrows Autumn statement from Philip Hammond, clients who are looking to buy a foreign currency may wish to take advantage of the recent spike in Sterlings favour. Call our trading floor on 01494 725 353 or email me here to retrieve a quote.


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