Sterling slips after good start to the week

After a solid start to the week for Sterling, Tuesday’s trading gave reason for caution for those more optimistic buyers. Despite much better than expected Public Sector Net Borrowing figures for the UK, the pound slipped a cent or more against the majority of other major currencies. In an otherwise quiet day on the markets this is another indication that sellers are coming back into the market at these current levels and that there may not be much left in the excellent run that GBP/EUR in particular has enjoyed since the US Election.

It is important to note that Sterling has not performed quite so well against other currencies with much of GBP/EUR gains down to a pressured Euro, more so than a completely rejuvenated pound. It is also important to note that the current Euro selling in the market is mostly speculation with fear over the possible outcome of the upcoming Italian Constitutional referendum that is held on December 4th. Should these fears not be realised that all this speculation will likely unwind with a stronger Euro again in the short term. The rest of the Euros weakness is largely down to the buoyant dollar, again as long term investors speculate on the potentially positive impact that new President Elect Donal Trump will have the US economy, another factor that is difficult to see as being a sustainable one given the uncertain backdrop of his appointment.

The day ahead is very much US focussed once again, after a string of European PMI data this morning at 9:00am. The afternoon US session brings eco-stats for jobless claims, durable goods orders, new home sales and manufacturing PMI between 1:30pm-3pm. All of this comes before the FOMC minutes at 7pm tonight, which are very likely to further indicate the increasing likelihood of a rate hike in the US at December’s meeting. This another factor that is almost entirely priced into the market since the US election with markets pricing as much as a 90% chance of this happening. December will bring important and rate changing announcements for the Pound, Euro and US Dollar so if you do have a larger requirement coming up and don’t wish to gamble too much then the current rates could prove to be an excellent opportunity for securing your currency given the movement in the last couple of weeks. To discuss your options contact your account manager today.