Sterling’s recent run came to an abrupt end during this morning’s trading, following the release of the latest UK Retail Sales figures.
The official figures came out well below the markets predicted results, which immediately caused investors to pull funds away from their Sterling positions.
GBP/EUR rates fell to 1.1303, after hitting a high of 1.1356 earlier in the day. The fact the Pound managed to find plenty of support around the 1.13 threshold is positive but any major advancements now look unlikely before the close of European trading today.
GBP/USD rates have been trading at near 18 month highs this week, with the Pound hitting 1.3945. However, today’s drop has seen Cable retract slightly, although the Pound is now holding firm in the mid 1.38’s. Whilst the Dollar is likely to find plenty of support around 1.40, the fact this threshold is even being mentioned is a testament to how far Sterling has come over recent weeks.
The key question now is how much further can this positive move take it? Personally, my opinion remains unchanged and that is those holding GBP should be looking at short-term market opportunities, rather than holding out for longer-term sustainable gains.
Looking ahead and Sterling’s value is likely to be driven by the market sentiments surrounding Brexit over the coming months and even beyond. Whilst negotiations have progressed, which in turn has allowed the Pound to gain some traction, it unlikely to be all smooth sailing. Whilst any positive strides forward in this sphere are likely to benefit Sterling immensely, I feel any resolution in the short-term is highly unlikely.
It is far more likely that Brexit negotiations will continue to stagnate, as they did during the early stages of phase one, and this in turn is likely to handicap any sustainable increases for the Pound.
With the Euro continuing to outperform most of its major currency counterparts, I would not be backing any Sterling increase above 1.15 in the foreseeable future and with the US economy continuing to impress, despite the negative perception that surround President Donald Trump, it may be prudent to take advantage of the recent improvement and current highs.
There are some key UK economic data releases to keep an eye out for next week, including Wednesday’s official Unemployment Rate. With 4.3% the expected figure, expect additional volatility on Sterling exchange rates, should we see an alternative reading.
Further ahead and all eyes will be on Friday’s UK Gross Domestic Product (GDP) figures, which will likely have a significant impact on the Pound.