Sterling recovers earlier losses following strong industrial output numbers

The Pound reversed earlier losses this morning following stronger-than-expected industrial production figures and data showing our trade deficit has narrowed.

UK leading indicator data releases, which are used to predict changes in the economy, have disappointed slightly over the past 10-days making investors nervous that the impact of Brexit is finally becoming evident. This morning’s data, however, indicates that the economy is still behaving robustly in spite of the UK’s vote to leave the EU last June.

Many traders are still reluctant to heavily buy the Pound, however, due to uncertainties that lie ahead. The Bank of England are also remaining on the fence, despite rising inflation levels, which has reduced the odds of a nearer interest rate hike and therefore the appeal of Sterling. If inflation continues to rise and growth ticks higher, however, this stance could quickly change and some policymakers (such as Kristin Forbes) are already beginning to become quite vocal about this.

In other news, the USD has been supported as President Trump signalled that a “phenomenal” tax plan is to be announced shortly. Investors feel that tax cuts could really help stimulate the US economy and consequently make the dollar more attractive. This effect, however, seems to contradict Trump’s aim of trying to reduce imports and increasing exports, as a stronger dollar will clearly do the opposite. Watch this space to see how he deals with this issue.

Sterling drops after BoE kick the can along the road

Sterling has given up some recent gains after the release of the latest BoE Quarterly Inflation Report.

Although they raised their growth forecasts, which was widely anticipated, they didn’t seem overly concerned about inflation moving higher and potentially pushing well over their targets over the next few years. They continued the neutral stance they took during last November’s report by stating that they stand ready to move interest rates up or down depending on what happens with the economy. The uncertainty over Brexit is clearly a concern and that a wait-and-see approach is currently their favoured course of action. Many traders were disappointed by this, as they felt the BoE would start to show more concern over rising prices and angle more towards monetary tightening.

As a result, Sterling has lost around 1.5-cents against the Euro, pushing back to Tuesday’s levels. The GBP/USD dropped just over 1% and therefore gave up all the gains it made throughout yesterday. Evidently the Brexit situation is going to continue to hinder Sterling gains. It takes a lot of positive news to make it edge slightly higher but not a lot of bad news to push it lower. Until we get a lot more clarity over Brexit (which might be a while), any significant gains Sterling makes against the majors is more likely to come from weakness in those currencies rather than from dramatic Pound strength.

Next up we have key UK job figures out tomorrow afternoon. As always, please make us aware of any upcoming requirements.

Sterling jumps higher, as traders cash in

Sterling has been pushing higher today as increased clarity over the Brexit talks continues to be taken positively by the market and as traders take profit on Sterling’s recent moves. Commentators have also put the current move down to optimistic hopes that Theresa May’s meeting with Donald Trump this Friday will go well.

Yesterday the Supreme court ruled that the British government must go through parliamentary vote before triggering Article 50, which officially starts the exit negotiations with the EU. This was widely anticipated but the judges gave no mention that parliament would have to go through the devolved parliaments of Northern Ireland and Scotland. This could be a bone of contention moving forward.

As a result, the GBP/USD has pushed up just under 2-cents from yesterday’s low and currently trades at a 6-week high. The GBP/EUR is nearly 2-cents higher than yesterday which is a 3-week high. Tomorrow morning we have important fourth quarter UK growth data, will these numbers continue to impress or will increased costs start to bite?

Sterling surges following PMs Brexit speech

The Pound is currently rallying after Theresa May outlined the government’s Brexit plans in the most detail to date.

Her general tone was very optimistic and she seeks a “phased approach” and smooth transition out of the EU. She also declared that the UK parliament will get to vote on the final Brexit terms and that they seek to remain a key European partner.

Traders had ditched Sterling over the weekend fearing a strongly worded “Hard Brexit” speech but those fears seem to have been exaggerated, resulting in a Pound rebound. Clearly, however, May’s speech was a ‘have your cake and eat it’ scenario and all that she has proposed is very unrealistic to achieve. The EU are still likely to want to make an example of the UK and, therefore, there will have to be some sacrifices on what May is pledging.

All of these comments have been taken well by the market (so far…) and Sterling is currently on track for its biggest daily rise since the 2008 financial crisis. As a result, the GBP/USD is up around 2.4% on the day, after rising nearly 3-cents from this morning. The GBP/EUR has moved up around 1.5% but is only trading around last Thursday’s level.

Politics will continue to be the main driver for Sterling, so expect continued volatility as the markets react to comments from global politicians. Next up we have US inflation figures out tomorrow, ECB interest rate meeting Thursday and Trump’s inauguration speech on Friday. Recently, the USD has been on the backfoot, as traders have become increasingly worried about Trump’s effectiveness as president.

Sterling dips ahead of Brexit speech

Sterling fell sharply at the open of currency markets last night ahead of tomorrow’s important Brexit speech from Theresa May.

Newspaper reports and comments over the weekend indicate that May is expected to signal the UK withdrawal from the single market in a so-called ‘Hard Brexit’. It seems her government are more concerned with the freedom to control immigration and our judicial system than have tariff-free trade with Europe.

This hard-lined approach could just be early negotiation tactics ahead of triggering Article 50 in March, but markets do not like it and, judging by the swing in the Pound, a ‘hard Brexit’ does not appear to be fully priced-in. It’s clear that the divergence between the UK and EU views will be at their most extreme at the start of the negotiations and this gap should decrease as talks go on and a final exit deal is finalised.

As a result, the GBP/USD dipped under 1.20 last night after quickly falling around 1.8%, which is the lowest it has been since the October flash crash (or 1985 if you ignore that blip). The GBP/EUR fell around 1.6%, hitting a 2-mth low.

It’s a fairly data-heavy week, so please let us know what your upcoming requirements are.

Dollar gives up strong gains following Trump Press conference

The USD gave up some impressive gains late in the day yesterday following President-Elect Trump’s first press conference since July.

Generally traders were disappointed by the lack of detail on important economic topics ­‑ such as tax, trade policies, and China relations – which would help guide their investments this year. Traders dislike uncertainty and had hoped for more clarity on the policies of incoming Trump. Cautiousness therefore led to the Dollar being heavily sold late in the day.

As a result, the GBP/USD jumped up over 2% from yesterday’s low and close to a 1-week high. The EUR/USD also bounced nearly 2% and the GBP/EUR remained fairly unaffected.