The Pound is set for a hugely volatile week as British politics surrounding Brexit will be the main theme for the entire week. Specifically the issue of whether or not Britain will be part of a customs union is likely to be the recurring topic. Labour leader Jeremy Corbyn made his speech today highlighting that he wishes to keep Britain inside a customs union. UK Prime Minister Theresa May will be making a speech on Friday however which will signal that Britain will not be in a customs union going forward. There is likely to be a sizeable market reaction on the back of the news especially if clarity over the future trading relationship between Britain and the EU is offered.
The last time there was a considerable market reaction after the Prime Minister spoke was at the Lancaster House speech just over one year ago. At that time the Pound strengthened by almost 2% against nearly all of the major currencies before falling sharply lower.
With reported agreement in the Prime Minister’s ministerial cabinet then a strong and well received approach across the House of Commons could see the Pound rally. Any market volatility will also be determined by the reaction from Europe. Any further references to “cherry picking” or “having cake and eating it” is likely to suggest a rockier path for sterling exchange rates ahead of key trade negotiations which are expected to start towards the end of March.
Positive data helps the Pound strengthen
UK mortgage approvals data this afternoon arrived considerably better than expected which has helped see the Pound rally. The stronger numbers highlight that the housing sector is still being propped up, as there have been some concerns as to the health of the property market. It is important as it usually the construction and housing markets which are the first to go ahead of a gloomier period.