May Day

17 January, 2017

Grace Rae

We began the week yesterday on a quiet note in terms of economic data, and opened doors with the pound taking another hit following announcements over the weekend that the Prime Minister Theresa May will deliver her first major speech which should focus on the issues of the country’s foreign policy and all important Brexit plans. The Pound did make some small recoveries in the morning, likely just correcting from the retraction and trading sideways as the day went on. In the early evening, Bank Of England’s Governor Mark Carney spoke at the London School of Economics, where he warned that although UK households have continued spending since the referendum vote, it could take a hit by rising prices from what is a weaker Pound just now. He also said that because the UK was moving towards a “period of somewhat higher consumer price inflation”, the next interest rate move could be either up or down.

How will the pound react?
Lots of key UK data out today with December Retail Sale figures, Producer Price Index and Consumer Price Index all due this morning at 9:30. Then the focus turns to the PM’s keynote speech where the market will be watching to see if she gives any signals towards the government’s strategy for Brexit. The pound has fallen fairy sharply already against its currency majors based on concerns of a ‘hard’ Brexit, and depending on the PM’s comments, could we see a further decline?

What’s to come?
Based on previous trends Sterling hasn’t performed so well when Brexit talks are in the spotlight and investors dislike uncertainty – causing the currency to suffer. We have seen the pound drop off against both the US Dollar and Euro quite dramatically over these last few months, and with Article 50 still to be invoked, plus President Elect Trump inauguration on Friday, it is safe to say the markets still have a lot of movement to come.

If you have an requirement due in the coming months, make sure you stay in close contact with your Currency Index account manager as all of these upcoming events will almost certainly lead to volatility and with some eco data coming in during the week, we could see significant movements.