The pound’s recent improvements were mirrored against the US dollar, moving back through 1.30 this week. Not only did GBP manage to once again breach this level but it found sufficient support to keep it above this key threshold for much of the week.
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This is not the first time that the pound has threatened to make a move back above 1.30 over recent months and each time, support has softened and the USD has managed to recover any major losses.
The USD has outperformed almost all of its major currency counterparts over the past twelve months, hitting multiple month highs against both GBP and the EUR on more than one occasion.
An accelerated economic performance over a sustained period has helped support the greenback's rise but over recent months there have been growing concerns that the US economy was set for a period of relative downturn, or at the very least a softening of its current growth rate.
Any clients holding USD may well have had a prosperous 2018 but there is so certainly no guarantee that they will be set for similar returns over the coming months. They may want to consider their currency positions and what they are looking to actually achieve as a return.
In my opinion it is unlikely that the highs for USD sellers of the past twelve will return, without the outcome of a no-Brexit deal.
Those clients holding Sterling on the other hand will be hoping for a breakthrough in Brexit talks both internally inside Parliament, and externally with the EU. Any last-minute agreement by UK MP’s to push through a Brexit deal could certainly drive investor confidence and the potential for a sharp upturn in GBP value would increase.
Whilst sterling still has a lot to prove after its recent malaise, those clients holding the pound will at least be relieved to see it moving back towards some of the highs of the past six months.
This improvement has come despite the UK seemingly being no closer to agreeing a Brexit deal with the EU, ahead of the impending deadline next month. The EU currently remain immoveable in their current stance, meaning the chances of a deal being made by the March 29th deadline seem ambitious at best.
This leads to the conclusion that investor confidence in the UK economy and ultimately the pound cannot have been raised significantly, based on the continued uncertainty surrounding Brexit.
The current upturn is more likely being facilitated by a sell-off of USD positions following the recent dovish comments made by the US Federal Reservce Bank (Fed), indicating they were intended to reduce the pace of their interest rate hikes during the course of 2019.
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