Sterling has made a positive move against the USD this morning, hitting 1.4077 at its high.
The greenback had found plenty of support around 1.40 earlier this week but poor US Retail Sales figures released yesterday, have inadvertently boosted the Pound’s value.
The fact that GBP has made little impact against the EUR, or in fact any of the other major currencies this week, indicates that the reason for the spike is due to investors pulling their funds away from the USD, rather than any overriding confidence in the Pound.
GBP/EUR rates have remained extremely range bound of late, with the Pound struggling to make sustained move up to, or through 1.13.
Brexit back in the spotlight
Brexit negotiations have come back into the media spotlight this week, with the EU’s chief negotiator Michel Barnier seemingly irked by comments made by Boris Johnson is his public address yesterday.
Mr Johnson’s speech, which was backed by No 10, outlined the Government’s vision to unite both the Leave and Remain camps, following a fractious time in terms of both public opinion and that of the current Government.
Senior Tory MPs remain split in terms of the best course of action for the UK following our exit from the EU. Mr Johnson tried to calm the situation by claiming that whilst leaving the single market and customs union was of benefit to the UK economy in the long-term, the UK decision to exit was not a “great V-sign from the cliffs of Dover”.
He, somewhat surprisingly, stuck to the Government’s official negotiating position and did little to try and boost his own political standing, which resulted in little impact on Sterling’s value.
However, Michel Barnier refuted claims by Mr Johnson that he was trying to create a “super state within the EU” and a compromise on what type of relationship the UK will have with the EU following Brexit seems no closer, as senior figures on both sides continue to draw battle lines.
Euro strengthens following positive data – EU growth at 10 year high
Sterling also faced resistance against the single currency following Eurozone Gross Domestic Product (GDP) and Industrial Production figures. Industrial Production came in above market expectation and helped support the EUR from any major losses against the Pound.
Whilst GDP figures came out as expected, further reports confirmed that the EU economy had grown at its fastest pace in a decade in 2017, news which is likely to further boost investor confidence in the single bloc.
Investors seem to be reacting to each news report as it is released, rather than factual information and as such, it proving increasingly difficult to dissect the current market.
With so many unanswered questions in terms of how the UK economy will react once the UK finally leave the single bloc and the fact we have gone from the fastest growing economy in the G7 group to the slowest, is clear proof that the UK economy is suffering as result of the current uncertainty.
I think it will extremely difficult for the Pound to make any sustainable impact against the EUR under current markets conditions and with the US economy generally performing well, it may be worth taking advantage of the current spike against the USD.