Key news this morning on the Pound was Inflation data which has come out as expected and saw sterling hold onto the recent gains we had seen. Inter Bank rates on GBPEUR remain in the mid 1.12’s whilst GBPUSD is also holding firm in the 1.37’s. The Pound has begun 2018 on a positive footing making headway against most currencies as confidence in the outcomes from Brexit increases. Whilst there are significant challenges ahead which could see the Pound weaker, the completion of the withdrawal agreement in December has given a most positive platform for the Pound.
The Inflation data came in at 3% which underscores the rising levels of Inflation predicted for the UK at present. The Pound is benefitting from the prospect of further interest rate hikes in 2018, however the big challenges ahead with Brexit will without doubt be a cause for concern. Clients looking to buy or sell the Pound should be very conscious of the prospect of the increased volatility once Brexit talks begin again. All in all, it seems the Pound should track the same ranges of late against most currencies (except the US dollar) in January, there is no major data scheduled which I would say would trigger moves outside of these more familiar levels.
Having said that, any big changes in the economic data, or some unexpected announcements relating to Brexit could see the Pound breakout of these levels. With Brexit talks on the transition beginning soon and trade talks not far behind there will soon be plenty of topics for discussion which could influence Sterling rates. Whilst Brexit is the biggest factor, economic data will now take on slightly more significance as there is a lack of any new developments on Brexit. Clients looking to buy or sell the Pound should pay particular attention to the economic data coming through as this might move the rates more than usual.