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Pound bounces around on Brexit negotiation posturing and rumours

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The Chancellor of the Exchequer, Philip Hammond, describing Brussels as ‘the enemy’ isn’t perhaps the best way to warm the frosty relationship that so far has led the drawn-out negotiation process between Britain and Europe navigating their way down the divorce path to rumble on without any sense of direction.

Hammond has been criticised for saying the Brexit process creates uncertainty, whilst Hammond argues he’s just a realist. Prominent Brexiteer, Lord Lawson ,has gone further and accused him of trying to sabotage the process. The chancellor defended himself saying ‘it’s absurd to pretend that the process we are engaged in hasn’t created some uncertainty. But the underlying economy remains robust’. Hammond went on to state that he ‘is committed to delivering a Brexit deal that works for Britain’.

Being a realist is, in my view, a good thing. As representative to his constituency, his Prime Minister, and his Government, he’s correct to implement the will of the people, and let’s not forget that the majority of the country voted to leave Europe in last year’s referendum. To approach the uncertainty of what will happen in the future, particularly in light of the negotiations not progressing well at all, is, if anything, very sensible.

This wisdom is what I would suggest people need to apply to their currency purchases. We’ve seen the good, bad, and ugly with the pound this calendar year, and are now looking ahead with a little optimism. Next week UK inflation data will give an indication on whether the Bank of England will act on raising interest rates next month. If they do so then we’d see the pound rally higher, but this move may be limited in time, as focus will soon turn to Brexit to knock the pound down again.

There’s no guarantee that the BOE will do anything with the interest rates of course, and all of this suggestion may not develop into anything at all, in which case the market will head lower. Monitoring the market, and protecting yourself if you need to, seems the wisest move of all.

By Luke Trevail, senior currency-trader

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