For now, it seems as though the pound has been relishing the festive break and the respite it has received from the absence of Brexit negotiations. This has been reflected in Sterling’s value against its counterparts, having remained within the range of 1.1243 and 1.1321 against the Euro this week and 1.3345 to 1.3454 against the US Dollar. Last week’s mortgage approval data release, as expected, did little to excite the currency markets and so attention now turns to 2018 and what could influence the Pound as we move into the New Year.

Brexit negotiations and trade talks progress

The most obvious mover of Sterling exchange rates is likely to be the ongoing negotiations between the UK and the EU following the UK’s decision to leave back in June 2016. At present the problems appear to be on the UK’s side, as Prime Minister Theresa May has had to battle hard to keep some of her unruly cabinet members on the same page. Although it’s hard to judge what direction the Pound will head in in 2018, one thing is certain, the Pound is likely to remain hyper-sensitive to any Brexit developments, so I expect to see some sharp movements as we receive news on progress.

Economic data and Interest rates

Inflation in the UK has recently hit a six-year high last year, pushing the rate up to 3.1%, which has forced the Governor of the Bank of England Mark Carney to write a letter to the Chancellor of the Exchequer, Phillip Hammond outlining what fiscal and monetary approaches could be used to combat high inflation. As a result, many banks such as Lloyds are predicting an interest rate hike from the Bank of England sometime around August or during Q3 of 2018. The markets often move on rumor, therefore the more likely this looks as we approach August the more Sterling is likely strengthen.