Sterling rallies to multi month highs
25 January, 2018
After a non-eventful start to the month for the Pound, yesterday saw fortunes start to turn in its favour with Sterling rallying across the board to multi month highs against most major currencies. The biggest gains were seen against the weakening US Dollar, with cable now up 7 cents in just 10 days. GBP/EUR also broke out of its sideways range of the recent months, rallying to the highest buying rates seen since the election last June.
Sterling gains come off the back of improved sentiment towards the UK political situation in recent days, and optimism of successful Brexit talks that are due to get underway again in February. These talks will be focussed on future trade deals between the UK and the Euro-zone and will be a critical part of this process, and one of the most significant when it comes to the markets. We can expect exchange rates to be extremely sensitive to any developments, good or bad, and as with the last round of talks we could easily see more pressure on Sterling if they drag on and do not come to any prompt agreements.
The Pound was also boosted yesterday following the latest unemployment figures for the UK which confirmed the headline rate at 4.3%. Of greater note was the average earnings figures which came in higher than forecast at 2.4%, up from 2.3%. With latest inflation figures dropping to 3% from 3.1%, the gap is now slowly closing.
It is important to remember in the currency markets that what goes up must come down, and with uncertain Brexit talks just round the corner, the recent gains could easily be eradicated. Should you wish to take advantage of the current peak buying levels, contact your broker today and ask about our Forward Contracts where you can guarantee these rates any needs during the coming months.
The day ahead is another big day with a key ECB rate decision meeting at 12:45pm and the usual press conference that will follow with Mario Draghi at 1:30pm. Just as in December when GBP/EUR rates shot up to 1.15, we could back below 1.14 within 24hrs if this decision favours the Euro.
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