The Pound has begun 2018 in a much more upbeat mood, holding onto most of the gains we saw towards the end of 2017. The Pound is currently almost 1 cent away from the best rates since May 2017 to buy Euros and we are very close to the best rates since the EU Referendum to buy US dollars, Australian dollars and New Zealand dollars.
Brexit developments will remain key for the Pound in 2018 and with the UK withdrawal agreement behind us, there is now scope for a more solid foundation for the Pound.
Brexit is clearly not resolved and the prospect for fresh developments both negatively and positively, especially related to the type of trade deal the UK will get with the EU, could trigger Sterling losses. With trade talks between the EU and UK not happening immediately there is now the prospect that the Pound may struggle as we fail to get clear information that would indicate there will be good news moving forward. Expectations are resting on the shoulders of further progress in negotiations but just like last year Sterling’s performance was linked to the headlines, this will be of key importance for Sterling this January and in the months and years ahead.
Key economic news released this morning at 09:30 am confirmed the latest Industrial and Manufacturing Production data which saw the Pound lower as the Trade Balance increased. Essentially the UK is importing far more than it is exporting.
Importantly in the afternoon today we have the latest UK GDP (Gross Domestic Product) Estimate release from the NIESR (National Institute of Economic and Social Research). This news is eagerly anticipated with markets closely watching the latest economic developments for the UK for signs of weakness following the Brexit vote. It does seem the UK and the Pound have turned a corner but how long will this last?