Focus on Sterling exchange rates today will centre on the Spring statement given by UK Chancellor of the Exchequer Philip Hammond at 12:30. This is effectively a budget update from the Autumn budget and is not expected to throw up too many surprises, although any upward revisions for economic growth or productivity offered in the statement could help see the Pound rally across all of the major currencies.
Stronger data last week saw the UK’s budget deficit reduced considerably and the Chancellor is likely to play on this and highlight a brighter outlook which would be seen as positive for the British economy and hence the Pound, which could lead to some Sterling strength. My view is that today’s statement will be upbeat and has the potential to see the Pound strengthen. The GBP/EUR exchange rate is sitting at 1.1260 and a move higher above 1.13 seems realistic.
Brexit negotiations for transitional agreement due to be completed this month
The Brexit negotiations continue with the second round of talks on the transitional arrangement expected to be concluded by the end of the month. An agreement here is likely to see some positive movement for the Pound although much of this may be priced into the market a week or two prior as we saw when the first round of negotiations was concluded.
Any gains are likely to be limited as the British Government will still need to negotiate the trickier issue of the future trade relationship and ultimately whether or not financial services can be included in such a deal. For the moment the EU has stated there is to be no cherry picking whilst Theresa May has said choosing which parts of the EU Britain wants to continue to be a part of is not cherry picking but rather all part of the negotiating of the best agreement that works for both the UK and the EU.
Politics are very much the order of the day and the Russian poisoning story is still grabbing all the headlines. In Italy though there still has not been a decision on which parties will form a coalition to govern. Coalition talks are expected to begin 23rd march and are likely to have an impact on GBP EUR rates of exchange.