The Pound has reached fresh highs against all currencies on the back of renewed confidence in both the outlook for Brexit and also the prospect of the UK raising interest rates.
I have to say that if we go back to points in 2017 and 2016, it is quite difficult to imagine Sterling at the current levels which it has now found itself at. The overriding belief is now that there will be more of an overall ‘softer’ Brexit which should minimise the disruption to the UK economy. This has helped the Pound to regain some strength during 2018 so far.
There could be further Sterling improvements ahead, although it is difficult to see anything major happening in April, since we do not have any key news like a Bank of England interest rate decision or any EU Summits released. What will be very important is the potential for future interest rate hikes, but with UK economic data struggling because of the weather in March, I feel it is likely the Bank of England will have to remain cautious in their assessments of future interest rate hikes.
Sterling will only rise this month if we see some sudden progress on Brexit or if there is an unexpected improvement in the UK economic data. Whilst there is a possibility this will happen, I do not feel that it is too likely since there are no scheduled ‘big’ releases on Brexit talks and the poor weather in March has seen the UK data coming out rather poorly so far.
The Pound is benefitting from the improvement in sentiment that we learned of last month but this will not alone be enough to see the Pound just continue to rise. Current levels, which are across the board at the top of the recent ranges are therefore very worthy of consideration as it seems unlikely the Pound will just keep rising without any extra new good news.