Sterling rates relatively static despite positive news heading into 2017

First thing yesterday morning house pricing data from Nationwide was released reflecting a strong finish to the year. Price increases were four times higher than expected for the month of December alone, which boosted total growth for the year across the UK up to 4.5% from the expected 3.8% to finish off 2016.

A standout performer for the UK since the shock of the Brexit vote, surprising confidence in the economy is not localised to the housing market.

Yesterday Deloitte published business confidence figures following interviews with 119 Finance Directors working for large businesses in the UK. 27% were now optimistic in the fourth quarter of this year for growth, compared to 16% in the third quarter (the immediate period following the Brexit vote).

Whilst the figures are still very far off from reflecting a ‘boom’ in the UK economy, confidence is improving, and you can see this tracking in the value of the Pound.

How does recent performance affect expectations next year?

The very beginning of the fourth quarter saw the Pound at its lowest point since the Brexit vote. The rhetoric on both sides of the Channel were pointing to a hard and almost violent exit from the EU, and investment into the UK was slowing to a trickle.

The key change has been the introduction of Parliament into the Brexit negotiations at the beginning of November following the Judicial Court hearing, which signalled to markets that Parliament would likely slow the Brexit process and reign in any extremes global financial institutions had been fearing.

Similarly other events globally have taken some of the spotlight away from the UK, side-lining some of the negative fixation from financial markets concerning the Pound towards the worries in Italy, and the direction of a Trump Presidency.

Supreme Court decision in January

The decision in January on Parliament’s role in the Brexit is the next milestone, with the appeal on November’s Judicial Court decision to be released and will govern the entire trajectory of the Brexit over the next few years. So one to watch out for if you have an interest in Sterling.

Will Parliament be consulted and updated on current negotiations and aims, with markets given a clear idea throughout the negotiations on the expectations on what and when the end result will be? Or will we return to the clandestine period of October, where cards were kept close to the chest and the Pound was losing value due to the uncertainty and near panic brought to the marketplace?

The result is gamble. If you wish to avoid the uncertainty that the turn of the year may bring, you can seize the gains made for the Pound since the beginning of November against most of the major currencies (with the only exception being the US Dollar) in order to avoid any potential downside.

Even if you do not require a foreign currency until later in the year, a popular option at the moment is forward contract which allows you to fix the rate of exchange as it is today for a specified period of time by you.

Call today if you wish to discuss a currency requirement, or would like to know more about what a forward contract entails. Our team of knowledgeable brokers are on standby to answer any of your questions or concerns on 01494 725 353.


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