The Pound has gained over two cents against the Euro (EUR) over the last 48 hours, with another spike this morning driving the Pound to Euro exchange rate up to 1.1393 at it’s highest point. The GBP/USD exchange rate is closing in on 1.35, whilst GBP/AUD levels have reached 1.78.
There is no doubt that yesterday’s announcement has boosted investor confidence in the Pound. There is now a real belief that Brexit negotiations can move to the next phase, where a future trade relationship with the EU is sure to be on the agenda.
Whilst these developments are current being viewed as a positive by investors, a sense of caution must remain. The reports indicate that a deal is close but no final agreement on the amount has been confirmed or agreed by the EU.
The EU have continually said they will not consider moving on to talks about possible future trade deals with the UK until the “divorce” bill was settled, the rights of EU nationals living in the United Kingdom had been agreed, and the Irish border separation has been dealt with.
Clearly there is still work to be done but even the slightest sense that an advancement in the stagnant talks has been made has been enough to boost market sentiment and ultimately Sterling’s value.
Personally, I would be tempted to take advantage of the spike, as the UK economy is still likely to remain under pressure over the coming months. Whatever the final bill is to be paid, it is sure to hit the UK economy hard over the coming years.
With many questions still to be answered regarding what sort of trade deal the UK can agree with the EU and how the UK economy may progress in unchartered territory, I would be looking for short-term improvements rather than holding out for longer-term sustainable gains.