Sterling seems to have recovered from its dip yesterday, making further gains against the EUR and USD.
This positive move has come about despite UK Manufacturing data coming out below expectation this morning, with the official figure of 55.3 well under the expected result.
The currency markets can prove unpredictable at the best of times but Manufacturing figures are a key component of any economy and as such, I’m slightly surprised the Pound hasn’t come under more pressure during early morning trading.
Sterling has been on an upward curve of late with multiple reports of post Brexit trade talks helping to remove some of the markets uncertainty, which has handicapped any major advances for the Pound over recent months.
UK-China trade discussions
UK Prime Minister Theresa May is currency in China discussing a potential trade partnership, news which has probably helped to facilitate Sterling’s improvement.
However, with the current Brexit talks entering a crucial stage (where trade deals in particular will be a major topic for discussion), it is currently unclear as to when the UK will be in a position to negotiate trade relationships with countries outside of the EU. This means that there will be tangible results for possibly years to come and as such, the current improvements may prove unsustainable in the long-term.
This theory was also backed up by a leaked Government report earlier this week, which indicated that the UK will be worse off after Brexit. The report covered all three Brexit scenarios, including a free trade agreement, access to the single market, or the worst case scenario of no deal being reached at all.
The Government were quick to react and said the findings were only a preliminary assessment but the news is hardly likely to inspire confidence amongst investors. Therefore, despite this positive recovery, the Pound could come under further pressure over the coming days as Brexit talks starting to dominate the headlines once more.