Sterling ended the month with a fair amount of momentum as fresh speculation around Brexit talks rekindled investor appetite in the pound. It seems Brexit secretary Dominic Raab‘s predictions of negotiations being concluded by the 21st of November filled the markets with confidence that the chances of a no deal Brexit are diminishing.
This morning we have seen news of a potentially huge breakthrough with Brexit negotiations. PM May is said to have reached an agreement with the EU, to protect the UK financial services industry's access to European markets. This seems all is set for a positive start to November for the pound.
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Although we are yet to have any supporting commentary on the matter from EU diplomats, the news from Raab was enough to bolster investor confidence, leaving the pound the best performer out of the basket of major currencies for the day. The question for those with an interest in foreign currency is, how feasible is Raab’s prediction?
Personally, I feel that there is still not enough detail in the UK’s statements of late, particularly around the Irish border, to be able to fully adhere to the distant promise of a deal being concluded 3 weeks from now.
The EU still seem adamant that an open Irish border along with the infamous “backstop clause” is the only way forward, which is a solution that Theresa May’s Government aren’t likely to push through Parliament as it stands.
Despite Raab’s confidence, the technicalities remain and I personally would be looking to make the most of the recent jump in positivity around the pound just in case Raab’s vision does not play out.
Of course, those with an immediate foreign currency requirement also have to consider what will be a heavily scrutinised Bank of England (Boe) Monetary policy meeting this afternoon.
The BoE will certainly not have missed yesterday’s fairly bleak consumer confidence release, showing a fall to 3-month lows as a result of the uncertainty around Brexit, particularly as the government’s recent Budget adjustments didn’t quite live up to what was expected by the public.
If we are going to see sustainable inroads from the pound, inflation needs to remain in line with the Bank of England’s target. If BoE Governor Mark Carney nods to yesterday’s poor release in anyway, the hopes of a interest rate hike in the not too distant future could soon evaporate, potentially leaving the pound less valuable as the week comes to an end.
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