Another confusing week on the markets- as nothing went to the Government’s initial plan; Theresa May decided to cancel the House of Commons vote for her Brexit deal so she could go and get clarification from the EU for the Irish Backstop- this was followed by a vote of no confidence within the Conservative Party which she managed to win allowing her to continue her job- but was then met with EU resistance on Friday as there was no further clarification or changes to the current deal.
So where does this leave the Pound? Currently there is no certainty at all in regards to Brexit so Sterling exchange rates are weak- fortunately, the Euro is also weak following Mario Draghi’s comments last week so most of the impact has been on GBPUSD.
The Dollar is expected to strengthen further this week as the Fed is forecasted to increase interest rates from 2.25% to 2.5% on Wednesday- which could make the GBPUSD fall further. The expectation is that GBPUSD could fall into the low 1.20’s before a retrace- however, a retrace will only occur once certainty from Brexit enters the markets again.
Between now and the new year- not much movement is expected- however, the Government could throw another spanner in the works over the next week as some members are now asking to vote on the deal- however, I personally cannot see this happening at such short notice before January- I am sure MP’s would like to get off work for Christmas as well!
Over the December period, liquidity in the markets is generally thin which means market moves can be sharp- if you would like to hedge yourself before new year please don’t hesitate to contact me directly.