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You are here: Home / British Sterling / Pound regains momentum but for how long?

Pound regains momentum but for how long?

February 10, 2017 by Rob Lloyd

Pound regains momentum but for how long?

Another good morning for the UK following a strong round of economic releases that once again defy Brexit predictions. Both Industrial and Manufacturing production was up significantly on forecasts as the weaker Pound continues to drive British exports up.

Strong production has also benefited the UK’s trade balance whilst consumer demand remains steady despite Brexit concerns. However the real driver for the Pound this week centres around the Brexit bill and Parliament’s ability to vote on final Brexit terms, providing some relief for GBP investors.

But with just over a month before it is expected Theresa May will pull the trigger on Article 50, is there much scope for further Pound Sterling strength?

Government to remain quiet during negotiations

One of the key concerns for Sterling investors follows comments from Theresa May late last year, when she indicated ‘no running commentary’ will be made during the negotiation stages of the divorce. Furthermore, the UK government have indicated the hardest of Brexits will likely follow, as May sets out her Brexit steps with immigration at the top of the priority list.

The UK have already had the ultimatum over access to the single market from top EU officials including the President Donald Tusk, on the basis that free movement of people is respected.

Investors have little to go on, but what little is known the UK may find itself outside of the single market with nothing but WTO tariffs to fall back on. The Pound is set for further volatility in the weeks and months ahead with little vision for GBP strength.

Higher inflation and interest rates

There is one element of Brexit that offers some hope for GBP investors, with higher inflation set to hit the UK the Bank of England may have to loosen monetary policy to accommodate for higher inflation. Kristin Forbes at the BoE made comments recently that highlights some form of action needed to combat higher inflation.

There remains opportunities for the Pound to make gains but for those looking to buy foreign currency with Sterling, making the decision before Article 50 deadlines may be the safer approach.

Filed Under: British Sterling

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About Rob Lloyd

Robert brings with him a wealth of knowledge on what is impacting exchange rates, especially around the subject of the EU Referendum and the implications for Sterling and Euro exchange rates.

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