Pound gets triple boost

2 February, 2016

Robin Haynes

Sterling was up around a cent against both the Euro and US Dollar in trading yesterday, as three pieces of good news gave the struggling Pound a small but nonetheless welcome boost for those of you sending money abroad.

Firstly we had better than expected manufacturing figures, with PMI for the sector up to a three-month high, in contrast to slowing figures in the Eurozone. The British manufacturing sector has posted worrying numbers in recent months, so although figures showed exports still falling (despite the weaker Pound) in January, sterling took some strength from the announcement with strong domestic demand cited as the catalyst for better growth.

Secondly, mortgage approvals rose faster than expected, and thirdly the President of the European Council, Donald Tusk, said that “good progress” had been made on David Cameron’s EU reform demands, with Mr Tusk expected to publish a potential settlement for the UK’s continued membership around noon today.

The run up to the forthcoming referendum is still very likely to damage the value of sterling due to market uncertainty, but a strong settlement deal will be seen as beneficial to the ‘yes’ campaign. If the 28 EU member states agree to put forward the reforms at this month’s EU summit, we could be on course for the promised referendum as early as June this year.

Quiet day ahead
Today we have a quieter day on the markets, with Eurozone unemployment (10am) the only data of note. The rest of the week sees many key releases however, so if there is further short-term improvement for the Pound today as the EU negotiation dominates headlines, it could be an opportunity to secure an improved exchange rate. Thursday is likely to be the most volatile day for exchange rates and the Pound in particular, with the Bank of England simultaneously publishing its key quarterly Inflation Report, interest rate decision and QE update, along with an accompanying speech by Governor, Mark Carney.