Sterling has found some support this week, making inroads against the EUR and curbing any further losses against the USD.
GBP/EUR rates spikes back above 1.14 yesterday, hitting 1.1432 at this morning’s high.
Whilst Cable rates have yet to advance the Pound has found plenty of support around 1.35, which is now likely to be a key threshold for the pair over the coming days.
Global events from yesterday are likely to overshadow any minor developments in the House of Lords and whilst Theresa May continues to find resistance at almost every juncture, President Trump may has once again stolen the limelight.
The most controversial President of my generation has caused international uproar by pulling the US out of the Iranian nuclear deal. Whilst the US were just one of several global powers to be part of the agreement, their withdrawal could potentially put the whole deal in jeopardy.
Whilst Trump claims it economically unviable, surely there is a method to his madness?
I fear not and it is once again a demonstration of a gung-ho Presidential style that sits uncomfortably with many.
This decision is yet to fully filter through to the currency markets but ironically it could actually boost the USD’s value against GBP, as investors global risk appetite decreases and they return funds to the safer haven currencies such as the USD.
Despite this I still feel the Pound will find plenty of support around 1.135 as we head towards the end of the trading week.
Another key economic event this week is tomorrow’s Bank of England (BoE) interest rate decision and subsequent monetary policy statement by governor Mark Carney.
It is likely that the markets have now factored in tomorrow’s decision, with the prospect of a rate hike seemingly completely eliminated from investors thought process.
The UK economy had, for a period of time earlier this year, over preformed. This had led to a strong run of economic data, which continued to defy analysts predications and as such investor s had started to factor in the likelihood of a 0.25% rate rise at the central banks next policy meeting this month.
However, a sharp downturn has changed market conditions and investors perception and this is why there was a sudden sell-off of Sterling currency positions.
It will be interesting to BoE governor Mark Carney’s comments during Thursday’s press conference as he is likely to give us a deeper insight into the central banks current thought process. It may well be that he dampens talk of a rate hike for the rest of this year, in which case it will be very difficult for Sterling to make any further impact over the subsequent days.