Following better than expected retail sales today, Sterling has not made significant gains and has even rebounded from its morning highs.
Has Sterling reached its post-Brexit highs?
A few weeks ago when the UK was on a run with positive economic data, Sterling reacted intensely against a basket of currencies and reached a peak of 19.99 against the Euro. Since then the GBPEUR has fallen back into the mid 1.17’s despite showing little concerns for the economic outlook. Today’s retail sales should have strengthened the UK’s foothold but as of late, little seems to providing investors with much confidence.
There does appear to be some changes to Sterlings’ reactions to economic data compared with the previous month, and I suspect that the idea of Brexit and its implications are beginning to take shape.
Sterling’s value to be affected by political news
It’s hard to argue that the UK is currently in a better place since Brexit, since Brexit is yet to be defined and a plan stipulated. The UK remains in limbo and this is where concerns for the economy lie. If the UK had a plan, and was working towards a plan there could be an argument for Sterling strength. However there isn’t, and the UK is incredibly limited by what it can do until it officially withdraws from the EU.
And with this in mind, further news of post-Brexit bloom will not be viewed as a sign of recovery, but a sign that the UK is getting by until its fate is decided.
Bank of England unlikely to cut rates today
It is unlikely that the Bank of England will implement further monetary measures at this stage, however much attention will be on Mark Carney and signs of future economic intervention. With Brexit unlikely to have a full impact on the economy for some time, it could be months before the Bank of England take further steps to stabilise the economy.
With the above in mind, at least until the US elections in November, Sterling could be in for further losses and those looking to buy foreign currency should consider acting sooner rather than later.