Yesterday the pound spiked against EUR and USD

20 February, 2019

Joe Goodwin

Yesterday the pound spiked against EUR and USD on reports that the PM may be reconsidering her position on the Backstop. The news hints that a new Backstop deal may be imminent with the EU, as a new proposal has the potential to unite both Brexiteers and Remainers. The pound gained around 1 cent against the euro and the US$ during afternoon trading.

Following the resignation of 7 Labour MP’s and warnings of more to come, Shadow Chancellor John McDonnell confirmed that Labour needed to carry out a “mammoth listening exercise” to address the concerns within the party. While the news had little effect on the pound, it’s yet another twist in the Brexit plot. It will be interesting to see whether a new Independent party will gain momentum in the weeks to come with a sky poll suggesting that the independent party had a greater chance of coming to power than the Lib Dems.

In other news, positive UK average earnings index figures came in at 3.4% which was the same as the previous result 3 months prior but below the expected result of 3.5%. However, Japanese car making Honda confirmed the closure of their plant in Swindon in 2021, resulting in the loss of 3,500 jobs, though Ian Howells (Honda Europe boss) confirmed that the decision had nothing to do with Brexit.

Elsewhere in the world, minutes from the Reserve Bank of Australia (RBA) showed that there were “significant uncertainties” on the economic outlook. House prices in Australia increased by almost 50% between 2012 and 2017 but more recently have declined by 8%, the RBA commented that further falls could weaken consumption and GDP. In UK trading hours the pound was up by just over a cent against the Aussie dollar.

Across the pond, US Senator Bernie Sanders announced his second bid for president in 2020. Out later today we have FOMC minutes at 7pm GMT which are expected to be dovish and the release of Australian wage price index results.

Though the pound has been relatively stable over the past few days, it remains sensible to plan ahead for any future foreign exchange requirements as a significant amount of uncertainty remains. If you have not done so already, speak to your consultant about strategies to reduce risk if you have an ongoing requirement to transfer funds overseas.