Good Manufacturing PMI data this morning helped Sterling to jump up against most major currencies and this trend could continue with Services Purchasing Managers Index data expected later in the week. With Brexit still the main focal point for GBP exchange rates and concern surrounding UK performance, positive economic data will help to ease many of those concerns.
Next week the latest production data will be released for the UK, which will be key for setting the tone for UK economic performance. It’s not till later into January will we start to see broad releases of data, however the main focus no doubt will be Brexit.
What to expect with Brexit talks
Considering the amount of weekly statements before Christmas following the Brexit talks I would expect the same format to continue. What that means is there will be market moving releases coming out all the time. UK and EU businesses will be waiting for information to decide the prospect of a trade deal being achieved within the tight time frame. If both sides are a long way from each other then the uncertainty could continue with Sterling weakness likely to be the main outcome.
Alternatively, if there was to be quick developments on how a trade agreement should look then Sterling could be on the receiving end of a major boost. At the moment the prospect of a fast trade deal is fairly limited and it would be surprising if talks went smoothly.
No deal is still considered as one of the UK’s strongest positions, which would see Britain fall into the World Trade Organisation. In my opinion this is already priced into Sterling’s value and I wouldn’t expect to see the Euro lose much more ground. Parity with Euro is a long way off however over the next few months it will become clearer what effect Brexit talks will have on Sterling.