Positivity From May The Pound Makes Hay

Monday saw the pound make serious gains across the board, following on from the recent jump we’ve enjoyed after Trumps election.

Making nearly 2 cents against both the US dollar and the single currency Euro, it seems the comments by Theresa May as she address the CBI business conference were well received. She stated Brexit would need to be a slow process so there was no “cliff fall” for businesses, EU negotiations cannot be done quickly and that Brexit gives opportunity to negotiate dynamic trading agreements. She also promised the Autumn statement will be “ambitious for business and ambitious for Britain”, stating the Chancellor will commit to providing a “strong and stable foundation” for the British economy. We eagerly await Mr Hammond’s first major role as Chancellor tomorrow to see if he can deliver on Ms May’s statements.

Marion Draghi didn’t seem to help the struggling euro as he testified at the European Parliament. The euro lost further ground as Mario stated the implementation of structural reforms needs to be substantially stepped up, whilst the ECB is committed to preserving the substantial degree of monetary accommodation to secure the desired inflation levels close to 2 percent over the medium term.

It’s likely the euro could remain under some pressure over the coming week or so as uncertainty surrounding the Italian constitutional vote on December 4th. A “No” vote is likely to send nerves rattling across the Eurozone as seen with anti-establishment votes over Brexit and the election of Trump recently. A “No” vote would mean current Prime Minister Renzi would not be able to overhaul the current constitution, aimed at speeding up law making and resulting in a more stable Government. He has promised to resign if the “No’s” win feeling it would be testimony to the lack of confidence in his ability to pull the economy out of the proverbial gutter and with the most recent poll showing the “No’s” slightly ahead we are likely to see some volatility before the voting occurs early December.

Today we have the low key Public Sector borrowing figure from the UK and existing home sales from across the pond after lunch. Whilst not expected to move the markets, and the decent gains made yesterday, a disappointing number could see the pound correct itself fast. Don’t get caught out, contact one of the Currency Index team now to discuss your options.