With the currency markets moving every two seconds, it can be vitally important to be aware of what is driving the currencies in or out of your favour. The below table shows the difference in USD you would have achieved when buying £200,000.00 during the high and low points of the past month.
|Currency Pair||% Change||Difference on £200,000|
The breaking news overnight was that the partial US shutdown has ended, as Republicans and Democrats voted for a temporary funding bill.
The decision by the Democratic leadership to accept the bill only came about, after Republicans agreed to a later debate on the future of young illegal immigrants.
However, this temporary reprieve only keeps the government funded until February 8th, with the hope that Congress can reach a longer-term budget agreement in the meantime.
Despite this seemingly positive development the markets have not yet reacted, with the USD struggling to make any impact against Sterling so far this week.
The Pound touched 1.40 overnight but quickly retracted, with the USD finding some support around this level, although based on the current trend, that level could once again be tested during Tuesday’s trading.
With the economic forum in Davos starting today, it will be interesting to see how the markets react to speeches by UK Prime Minster Theresa May & US President Donald Trump, with the latter’s presence likely to cause tension amongst some key financial and political figureheads.
Many clients will now be questioning which direction Cable will take next and despite the positive developments for Sterling of late, I still do not envisage an aggressive spike above 1.40 under current market conditions.
With Brexit negotiations heading into the key phase, it is likely pressure will be put back on the Pound and with the US economy still performing well above previous estimates, it is likely to remain well supported over the coming weeks.
This does not mean that a spike above 1.40 is impossible and whilst we may see this level tested on more the one occasion over the course of this week, I would personally be very tempted to take advantage of the current highs and remove any risk from the current market ahead of the Brexit talks resuming.
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