Sterling markets continue to consolidate in a sideways fashion

22 November, 2019

Rob Bastin

Sterling markets continue to consolidate in a sideways fashion, as markets tread cautiously ahead the crucial election on 12th December. With record numbers of voting registrations already seen, this election is set to be one of the most unpredictable for many years. Some will vote with their heads, some with their hearts, and others will vote tactically to try and unseat the opposition. This election is of course as much about Brexit and long term future and direction on the UK, as it is about the wider manifestos that offer a huge range of promises. The outcome of this election could lead to a Brexit path that ranges from a cliff edge ‘no deal’ scenario, right up to no Brexit all. With this in mind there is likely 10-15% movement for Sterling over the next 12 months in either direction depending on who is in control of Brexit come December 13th.

December is set to be an incredibly volatile time as markets begin to bet on these long term movements, particularly as we get closer to the result and more accurate polls develop. Given the context of this election however, polls should certainly be taken with a pinch of salt, particularly the ones we are seeing currently. If you would like an independent opinion of how election results are likely to impact the rates then contact your currency consultant today to help you manage the difficult month ahead of us.

Those of you who need to send money overseas and understandably may not want to get caught up in all the election volatility, then the good news is that Sterling is currently trading at its best levels for 6 months or longer against most major currencies. This follows a significant 8-10% rise in rats since August that are still holding at the peaks whilst the conservatives are leading in the polls. This of course could all change in the coming weeks.

Elections aside, the last couple days have seen the latest FOMC minutes from the Federal Reserve and public sector net borrowing figures for the UK. The FOMC minutes indicated that its position is now far more neutral with regard to any further changes to the base rate, and will await further data confirmation before taking action. The Fed has cut rates 3 times this year and many expect that further cuts are still to come. In the UK public borrowing is the highest in 5 years and has risen by 10% just since April, showing government borrowing on the rise even before all the added spending pledges that come with next month’s election.

The day ahead will see European PMI data at 9am, UK PMI figures at 9:30am and US PMI this afternoon at 2:45pm.