Pound hits 10 week highs
2 December, 2016
Yesterday we saw a Sterling serge, breaking through new resistance levels against the euro, giving the best rates seen in almost three months, and up almost 1% against the US Dollar.
The rise in Sterling strength could be down to a number of reasons. Firstly, investors reacting off news that the UK could retain preferential access to the EU single market after Brexit Secretary David Davies said that the UK would consider making contributions to the EU in order to safeguard the best possible access to the single market. In recent times, the rates have been extremely volatile and since the June vote the markets have been reacting of comments made by government officials surrounding the issue of Brexit, and with what could be a long winded negotiation process ahead of us, we could well see this volatility continue for some time as new information regarding exit negotiations emerges.
Secondly, this weekend we have another political event that could cause a stir for the exchange rates. Italy is holding a referendum to vote on if they will accept a package of constitutional reform put forward by Italy’s Prime Minister Matteo Renzi. Opinion polls have suggested a lean towards turning down the constitutional reforms, and should a ‘No’ vote win we may perhaps see markets react and see a weaker Euro.(Assuming this hasn’t been priced in by investors already). PM Renzi has promised to resign should voters reject the reforms and with resignation comes government uncertainty. One thing investors in particular hate which in turn reflects in the currency’s strength.
In terms of data, yesterday morning brought a negative result for UK Markit Manufacturing PMI posting 1.1 under expectations, swiftly followed positive Euro Unemployment Rates , which posted a 0.1% reduction from previous figures. The afternoon’s data focus was on the US, Jobless Claims posting a negative result of 15,000 more people making initial jobless claims. US again posted positive for both ISM Manufacturing PMI and ISM Prices Paid for November, and Construction Spending coming is as expected at 0.5%.
Today, on the data front we have UK PMI Construction this morning at 09:30, EUR Producer Price Index at 10:00, then in the afternoon US Labour force participation rate, average earnings, unemployment rate and the all important Nonfarm Payrolls all at 13:30. Also at 13:30 we have CAD unemployment rate and Participation rate.
With the vote due on Sunday 4th December, those looking to secure currency in the coming months might be wise to consider booking their requirement ahead of the vote this Sunday. Remember, you can secure your currency ahead of needing to send by using our forward contracts. Call the Currency Index team today to see how we can best help you save money and secure your currency transfers.
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