Sterling has taken an expected drop this afternoon which has seen the Sterling to Euro pair drop below the 1.12 level at the inter-bank level. The reason behind the sudden drop appears to be the comments from Chancellor Hammond, after he announced that the Treasury won’t stand in the way of further quantitative easing.
Markets have reacted quickly to this statement after spending the past week trading in a relatively flat fashion, with the Pound slowly climbing throughout this time after language towards the Brexit and its negotiations has softened over the past week.
The sell-off in the Pound has also been galvanised after Hammond warned about EU vindictiveness regarding the Brexit negotiations, which isn’t a good sign for the UK economy and certainly unlikely to give the currency a boost.
As previously mentioned the Pounds sell-off had been on hold for a short while, but we had seen the Pound under pressure earlier in the month as European leaders such as Francois Hollande and also Donald Tusk outlined their stance towards the UK’s exit, with talk of a Hard Brexit or no Brexit.
This afternoon has proved that the Pound is still vulnerable, so those hoping to sell Sterling at higher rates should pay attention to what’s said by the people that matter.
At the time of writing Mark Carney is giving a speech in the House of Commons, so this afternoons movement may not be the end of the days volatility.