Sterling enters December in good health

November was a particularly strong month for the Pound as the currency gained substantially against all major currencies.

After beginning last month around a 5 year low against the Euro and a 30+ year low against the US Dollar, the Pound rallied throughout the month (November has historically been a strong month for the Pound) and gained an impressive 7 cents when compared with the Euro making a €200,000 purchase £10,878 cheaper.

Positive sentiment surrounding the UK economy, and therefore the Pound, has been abundant as of late which has been behind Sterling's surging value.

Donald Trump unexpectedly won the US Presidential Election which resulted in a boost to Sterlings value. This was likely down to his personal business interests here along with his mentioning of the special relationship between the UK and US on numerous occasions. Hes also been positive surrounding the UKs planned Brexit therefore Sterling bulls have welcomed the news of a Trump Presidency.

David Davis (Brexit Secretary) offered those hoping the UK will retain access to the single market some hope, after recently suggesting the UK Government may be willing to pay to retain access to it. This boosted the Pound further although weve been told not to expect much of an insight into the Governments plans as they dont wish to offer a 'running commentary' on the Brexit.

Very early this week GBP/EUR hit its highest level since July, mostly due to Euro weakness after the Italian Prime Minister, Matteo Renzi stepped down. He called a Referendum in order to try and change the constitution in order to help with much needed banking reforms in Italy. But he failed to win the support of the Italian people and has subsequently stepped down which pushed the GBP/EUR pair above 1.20 if only for a short while.

The most recent boost to Sterlings value came on Monday, when the Services PMI (Purchasing Managers Index) demonstrated improving business sentiment/conditions within the UK, with the figure hitting its highest level since January. The services sector makes up for over two-thirds of the UK economy so this area of the economy is particularly important.

What could cause the Pound to reverse its recent gains?

Those watching Sterling rise and hoping for further gains have a number of options. If youre targeting a particular level feel free to get in touch as we have automated trading systems which can help you achieve your price targets, and I also think its a good idea to make us aware of your lower price targets or worst case scenario’ levels in case the Pounds fortunes begin to turn.

As with stocks and shares currencies tend to fall faster than they rise, so putting yourself in position to react to sudden price movements could be a worthwhile decision.

One of the key potential drivers of Sterling value over the next few days and up until January could be the outcome of the Governments High Court Decision appeal regarding the invocation of Article 50. I think that if the Governments appeal is rejected we could see the Pound gain further but on the other hand, a successful appeal means the UK won’t need parliamentary approval before beginning the Brexit process, meaning we revert back to Theresa Mays original plan of starting next March. I think there’s a chance we could see a sell-off in the Pound if this occurs.

Today, there will be indicative GDP figures for the past 3 months, these will be released by a leading think-tank at 3pm and the expectation is 0.4% so expect any deviations to move the market. Then on Friday at 8.30am Consumer Inflation Expectations will be released and the expectation is for 2.2% which is 0.2% above the Bank of Englands target, so expect a larger than expected figure to be met with caution by the markets. Feel free to get in touch if you wish to discuss any of these releases in further detail.

Uncertainty still surrounds the Pound with the outcome of the Supreme Court hearing due in January. Clients holding Sterling may wish to cash in on the recent gains in the Pounds favour. Call us today on 01494 725 353 or email me here for a free quote.

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