Sterling started the week flat as Brexit concerns continue

5 February, 2019

Simon Eastman

Sterling started the week flat as Brexit concerns continue to keep the pressure on the currency markets.

With only construction PMI to work with, which came in lower than expected, investors had little reason to buy the pound. The reading for the construction industry was expected to drop, but only slightly from 52.8 to 52.4, but the reality was much worse, with the actual reading coming in at 50.6. This still shows there is growth in construction, but only just and next month could see a dip below the key figure of 50, the difference between growth and contraction.

Elsewhere, MPs started 3 days of talks, trying to find an alternative option to the current backstop plan for the Irish border. With the deal pretty much hanging by a thread and this being the main point of conjecture, Theresa May is in for a tough ride and the pound is unlikely to garner much support ahead of any news from the talks, with any outcome paving the way for the pound as the month goes on.

Today is a little busier for data releases with Markit services PMI for many EU countries and the EU overall, plus the UK and the US. The EU release their retail sales for January at 10am, while the US have the key non-manufacturing PMI released at 3pm. Overnight the RBA released their interest rate decision and policy statement. With no change expected for the headline rate, we weren’t expecting much to happen but we did see some dollar strengthening as the statement was digested. The headline rate stayed at 1.5 percent but the bank did lower growth and inflation forecasts which seemed to help the Aussie which gained 1.5 cents against the pound, stating the 2 percent target level was not expected to reach until 2020.

With the unexpected often expected in these volatile market conditions, it’s often prudent to think about any upcoming exchange sooner rather than later. If you have a transfer to make in the coming weeks or months, speak to one of the team today to discuss the options available to make your money go further.