The UK is still no closer to Brexit, and ultimately Sterling remains vulnerable to further news of when or what Brexit is. Has Sterling peaked at its highest levels prior to Article 50?

UK economy improving but current trend unlikely to continue

It’s been a turbulent ride for Sterling of late, with increased market volatility across the exchange following our now infamous Brexit decision. With the subsequent downturn sapping investor confidence in the UK economy, it has inevitably caused the Pound to lose value extremely quickly.

Since then many of my clients have been questioning how and when this negative trend may subside and despite the uncertainty remaining, we have finally seen GBP gain some sort of foothold in the market.

The catalyst for Sterling’s spike was last week’s Manufacturing & Construction data, both of which came in well above market expectation. This was followed on Monday by improved Services data, all which contributed to Sterling’s recent improvement. We saw gains against the EUR, USD & AUD, finally giving those clients holding GBP something to smile about.

What was interesting is that all three sets of economic data came in above the expected market result, which is key for investors who are buying and selling large currency positions as they will price in the expected outcome. If the figure comes in outside of this remit we usually see increase market volatility, as happened with Sterling over recent days. This gives short-term opportunities to those clients holding the Pound, to trade above levels they may have expected to achieve under current market conditions.

Market scepticism still likely to handicap any Sterling advances

Whilst the Pounds position is looking far healthier than it was a couple of months ago, we need to remember there is still a huge amount of uncertainty surrounding the UK’s current economic position. Yesterday’s poor Manufacturing & Production figures were a stark reminder of how fragile the UK economy remains and we are still no closer to understanding how and when we will facilitate our exit from the EU and the potential impact this will have on GBP exchange rates.

This was personified by yesterday’s NIESR Gross Domestic Product (GDP) estimate, which came in lower than estimated at 0.3%. This again backs up my earlier point about the current consensus surrounding the UK economy, which remains cautious at best.

Those clients holding Sterling have been given a short-term opportunity to trade almost five cents higher than we sat only a month ago against all three of the aforementioned currencies and I would be extremely tempted to take advantage of this position and not gamble on what is still a very volatile and unpredictable market.

With further movements likely for Sterling in the weeks ahead, getting in touch with our team could help you save £1000s on a currency exchange. Call our trading floor today on 01494 725 353.


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