GBP exchange rates begun 2019 in disappointing fashion yesterday, with the Pound being the worst performer of the major currency pairs during the trading session.
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The drop in the Pound’s value will have come as a disappointment to Sterling bulls, after some better than expected economic data showed that the outlook for the UK’s manufacturing sector is improving.
At 9.30am yesterday Manufacturing PMI for the UK came out at 54.2 versus the expectation of 53.6. This figure is forward looking in that it covers sentiment within the sector, and a measure north of 50 is considered positive. Under normal circumstances we would have expected to see GBP climb off the back of a release like this, although yesterday the Pound dropped quite considerably and I think this is worth considering if you have a currency requirement involving the Pound this month. It’s likely that Brexit concerns are behind yesterday’s drop and this pattern could continue as some of the key dates regarding Brexit approach.
Yesterday’s market report gave us a good outline of the key dates regarding Brexit. Those with a more short term outlook should be aware of the importance of the vote in Parliament regarding PM Theresa May’s Brexit deal. On the 14th the vote will take place after previously being postponed, owing to the Prime Minister’s concerns of a major loss on the vote.
If May has managed to convince her Party members that her deal is best for the UK moving forward, I would expect to see a strong Sterling spike as it will offer more certainty for the UK economy this year. On the other hand if she loses by a considerable margin I think we may see Sterling drop below some of its current support levels, such as 1.10 for GBP/EUR and 1.25 for GBP/USD.
The vote on the 14th will then tie into the next key date on the calendar, which is the 21st. This is the final date the Government has to release its withdrawal plans so we could be in for a volatile week in the middle of this month. Letting us know at this early stage if you would like to be updated in the event of a major market movement could be worth it.
Despite a potentially hectic month for the Pound due to the political influences on its value, this week is likely to be quiet as MPs don’t return until the 7th. There will be further PMI data releases this week though, with Construction PMI due out today and then Services on Friday. Friday’s release is arguably more important as the Services sector covers around 80% of the UK economy so do let us know if you wish to plan around these 9.30am releases.
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