The Pound has been trading in a very tight range during the last month of 2017, what can we expect in 2018 for Sterling against its currency pairs? The below table shows the market movements for a number of currency pairings in the last 30 days:
|Currency Pair||% Change||Difference on £200,000|
During 2017 the Pound was weighed down heavily against both the Euro and the US Dollar once Article 50 was triggered early in the year. The on-going Brexit sagas have yielded little in terms of giving the Pound a boost. We did see a very brief period of respite for Sterling once the Irish border issue was settled as well as citizens rights across Europe but the gains were short lived.
Indeed, as we head into the New Year I cannot foresee the Pound making any real gains until we are further into the Brexit negotiations. We have not yet made any real trade deals and with just a year to go before the UK is due to leave the European Union, time is slowly running out.
The likelihood is that a period of extension will be granted to allow the UK time to sort out its laws going forward as well as organising how trade will work in reality. However, as we are still in a state to political and economic limbo concerning Brexit this was why I think the Pound will find it difficult to get back to levels for GBPEUR and GBPUSD in 2015.
The UK stock market has over the festive period hit close to its highest level in history helped in part by Donald Trump’s tax reforms.
The fall in the value of the Pound has in effect helped the stock market to rise in value as most of the companies listed express heir profits in US Dollars.
With UK GDP still relatively low and average earnings lagging behind inflation levels, the real economy is showing signs of a struggle even if the FTSE is rising in value.
The good news is a low Pound means that British exports can remain highly competitive, but it also causes problems for inflation as it means a basket of goods becomes more expensive for the British consumer.
This morning the UK releases its first economic data in the form of the latest Markit Manufacturing PMI for December. Expectations are for 58 so anything different is likely to cause volatility for the Pound.
On Thursday the UK releases Mortgage Approvals for November as well as Services data for December. Services is a crucial part of the economy and forms a large part of UK GDP so make sure you’re prepared to make a currency exchange quickly following the release as this could influence the Pound going forward this month.
For more information on how future data releases could affect Sterling rates, call our trading floor on 01494 725 353 or email me at email@example.com.
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