The pound bounced back yesterday on news that UK wage growth had beaten expectations. This offset some of the losses for sterling on Monday when UK economic growth was shown to have fallen 0.4% in April following a sharp fall in the automotive sector.
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The positive UK labour market data has been one of the good news stories in the last 3 years, defying the doom and gloom on Brexit. Despite the more positive news yesterday, the pound is in a very precarious position and clients considering any foreign currency purchase with sterling might be wise to carefully consider all their options.
There is little key UK data for the rest of this week so the market could take its cues from the colourful Conservative leadership campaigns. Fresh concerns on which direction Brexit will be taking are being highlighted daily as investors try to gauge where we are headed. Boris is leading the pack with Gove and Hunt closely behind, expect more headlines as Boris officially launches his campaign today.
Amidst the uncertainty it is difficult to make a strong case for sterling gains, the pound may continue to remain on the weaker side as investors await fresh concrete news on who will be the next Conservative leader and await the true meaning of Brexit.
Labour is making moves to block no-deal, via a cross-party motion. The motion, which could be tabled in parliament today, would give MP’s control over the parliamentary agenda on the 25th June. Sterling is adrift following the conflicting signals on Brexit, with many of the Tory frontrunners being clear that no-deal is an option, potentially so they can renegotiate with the EU. Yesterday, Jean Claude Junker, stated that ‘there will be no renegotiations as far as the content of the withdrawal agreement is concerned’.
This makes for a very interesting time up ahead as political reality meets the ongoing rhetoric from both sides of the Channel, and the various factions on Brexit in the UK.
Eventually, for there to be progress, one side must cave in. At present, this seems unlikely, so it is possible we will be forced to see another extension, particularly with the UK parliament set against a no-deal. Other options will include a General Election or second referendum, the prospects of which seem unlikely to lift the pound.
Sterling seems unlikely to perform well with such uncertainties ahead. With the breaking political news likely to affect the market, clients with any positions to buy or sell sterling might well benefit from a quick review with their account manager, to ensure they are kept up to date.
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