Luke Trevail, a currency exchange specialist at forex brokers TorFX, looks at the factors driving the pound’s exchange rate this week.
This week, another shock took over the world markets and the pound, for once, has come out on top.
Donald Trump will be the 45th President of the United States. The election has been widely reported on and the result has shocked many. Stock markets were losing heavily on Wednesday and look set to finish the week badly.
How the world will look during Trump’s tenure remains to be seen, but much like Brexit this appears to be the result of the forgotten man finding his voice. The pen appears to be mightier than the sword, and the simple X in the box by mostly middle America has driven the result. The riots will stop soon and then the real work begins in January, when he’s officially sworn in.
The currency markets were expecting a Clinton victory and the dollar lost around 2% immediately following the result. The rest of Wednesday was fairly subdued and the pound initially lost ground, falling to below €1.10 for the first time since earlier in October. The US Dollar is a safe haven currency. These deposits seem to have been ripped out of the US Bank’s clutch and investors are keen to place funds in somewhere more stable. It appears, despite Brexit uncertainty that Sterling is able to roll back a couple of years and benefit from its own safe haven status.
Wednesday afternoon we finished trading at €1.1380, a near four cent swing on the day. We have continued to gain as the week has progressed, and reached €1.1650 earlier before settling back a touch.
The question that all of my clients have been asking is, ‘how high will it go?’ The answer remains the same, and that is that no one knows. For just a few days the attention has been away from the Brexit furore. Analysts are still suggesting that the pound will come back to close to parity and Prime Minister Theresa May stated on her trip to India this week that she still expects things to progress despite the High Court’s ruling that Parliament will vote on whether Article 50 will be triggered.
As you can see, a huge amount of uncertainty continues with the volatile markets. For now, it’s an opportunity for you to take advantage. Don’t expect miracles however, they might be Trumped.
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.
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