Luke Trevail, a currency exchange specialist at forex brokers TorFX, looks at the factors driving the pound’s exchange rate this week.
The pound has come to life in the last couple of weeks. Following Donald Trump’s shock win earlier in November and uncertainty surrounding the European economic foundation which has the potential to shake the single market from its very core.
The Italian political reform referendum has the potential to crash the financial, banking and political system significantly of Prime Minister Matteo Renzi loses the vote on constitutional change. Fears of a far right wave of change in 2017 sweeping across the continent are focusing the market and are creating weakness in the euro.
Sterling has crept to an 11 week high, and at the time of writing is testing these levels suggesting that a move higher could be seen. The Supreme Court in the UK meet next week to decide on whether to approve the High Court’s ruling that the House of Commons will get to vote on whether Article 50 can be acted upon. The decision on this isn’t expected until after Christmas.
Brexit has been largely off the agenda in world politics, and then David Davis the glamorous sounding Brexit Secretary stated that Britain might consider making payment to the EU after we leave the bloc to secure the best access to the single market. This is virtually what we do now anyway and are classed as ‘in’ Europe. What seems to be emerging is that the pound cares little whether the UK is in Europe or out of it, but what is a concern is our access to the single market, and avoiding any tariffs or taxes on trading with our closest partner. The suggestion that we could have uninterrupted access has given the pound more comfort and leant to the move upward this week.
From the horror of €1.08 in October, we’ve seen €1.19 this week and this could be in line to improve further.
For those of you that have waited, remember that Brexit could swim to the surface and bite you at any time, but for the time being it seems like plain sailing towards €1.20 once again. Don’t miss out, or expect any miracles.
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.