The Pound has had a positive week rising on improved expectations of a less disruptive Brexit and a Bank of England ready to raise interest rates. The market is looking much better for the Pound with much of the news triggering improvements and expectations high for even better news in the weeks ahead.
If we contrast the sentiments on Brexit today to those last year where we were looking at a hard Brexit, the mood today is much more optimistic. The transitional deal has to be finalised this week but is looking very likely to be agreed.
The economic news is now much more positive too with the UK economy holding up and economic growth likely to continue. The Pound is also stronger since the current economic conditions have led to the Bank of England looking to raise interest rates. The news this week on Inflation and Unemployment has all helped shape the conditions which means that soon the time could be right for the Bank of England to hike their base rate.
Tomorrow is the Bank of England’s latest interest rate decision and this is the most important news of the week, whilst we can make an educated guess about where the rates will go, there is no telling exactly what we will see. Hopefully the overall expectations will remain positive and the Pound should rally further, there is a danger now that with so much positive news, Sterling becomes immune to the good news and sensitive to the bad.
Whilst the progress on the Pound is welcome and may have further to run in the short-term, we still have some major obstacles to overcome from Brexit before investors and the market can really look to the future with absolute confidence. The current goodwill being extended to the Pound may not last long and clients looking to buy or sell should be making plans around the potential for further changes in sentiment.