Luke Trevail, a currency exchange specialist at forex brokers TorFX, looks at the factors driving the pound’s exchange rate this week.
I’ve described the markets in the past as appearing to be a bit of a rollercoaster. The twists and turns never seem to be far away and this week this has once again proven to be the case.
Sterling was treading water for the last couple of weeks, after bouncing back a touch from the €1.0830 lows of October.
Yesterday all eyes were on the High Court when they ruled that the Government will need parliamentary approval to trigger Article 50, which would lead to the negotiations to begin between UK and the European Union about our leaving the bloc. An appeal will be heard in early December, but many think the High Court’s decision is based on the fact that they are satisfied that it will happen. A vote on whether we will leave the EU now rests with the House of Commons.
It’s too soon to leap to the conclusion that Brexit won’t happen, but with the possibility that there’s a chance of this has been enough to give the pound a welcome boost. In a little more than 24 hours, we’ve moved to €1.1287 which is up 2% from prior to the announcement.
Theresa May suffered a body blow with the ruling casting doubt on her claims that ‘Brexit will mean Brexit’. Her Government had already been accused of stalling over their plan for the next 12 months, with many worried what a ‘Hard Brexit’ might mean, as it’s not the amicable split that people many had voted for.
Just as Sterling was enjoying a rare good run the Bank of England announced the decision from their latest Monetary Policy Committee meeting. After the cut seen in August, it was widely expected that the bank would slice rates to a new record low at 0.1%.
Instead Mark Carney, who earlier this week decided to extend his tenure to oversee the Brexit negotiations, and the rest of the committee kept rates on hold and then underlined the good news by raising 2017 growth and inflation forecasts. The Bank of England also said that it expects the UK economy to grow by 2.2%, up from previous forecasts. This helped boost the pound further.
Before we get too excited, we must remember that this is a couple of days worth of good news after 4 months of gloom so we need to put things into perspective. Anyone looking to buy the euro are in a very good position to act whilst going is very good.
Next week brings the US presidential elections. If Trump trumps Clinton it will have far reaching consequences on the markets internationally. Quite what, we don’t know but being alive to this volatile market is important.
Whoever said this was boring eh?
This article is written by a foreign-currency broker working for TorFX, a forex broker established in 2004 to provide foreign exchange and international payments to both individuals and companies. TorFX is authorised by the Financial Conduct Authority under the Payment Service Regulations 2009 for the provision of payment services. Their FCA number is 517320. To verify their authorisation, you can visit the Financial Services Register and search the register using their FCA number. SPI is not responsible for the opinions of guest contributors.