Finally, now Christmas and New Year is out of the way, we can get back on to the markets and see what is ahead of us over the next few weeks!
As we entered 2020, Sterling lost the majority of its gains against the Euro and Dollar that we saw after the Election results- there has been no known catalyst for this, all I have really put this down to is lack of liquidity in the markets, traders are yet to return to work, and markets have been relatively low. Also, given new war risks following the U.S’s move against Iran last week, money has been flowing into commodities, which is why we have seen a spike on Gold, Silver & Oil, and a sharp drop in currencies.
Now here is some goods news- many technical analysts are long Sterling- which basically means they are expecting further strength this year- in the short term, many analysts are predicting rates above 1.21 for GBPEUR, which would be slightly above the Election high, we will have to see evidence of this over the week as money flows back into the markets, if we see Sterling begin to rise, I will be more inclined to follow this analysis.
This week, the Brexit Withdrawal Bill will enter Parliament, and it is widely expected that due to Boris Johnson’s majority, this will fly through and become law by the end of the week. This isn’t a volatile event for Sterling, however, it may give some reason for strength once it is set in stone.
This year, Brexit will still be a key factor for exchange rates as the UK begin to discuss trade agreements, the U.S trade wars will still be a big topic, and of course, anything war-related will have an effect on the market. I do think that economic data will now have more of an effect on Sterling as much political risk has begun to disappear following the election, and it will be interesting to see whether the Bank of England looks to cut interest rates this year.