Last week was pretty strong for the Pound as we saw 1.15 break briefly against the Euro- this was due to reports coming from Parliament that a Brexit deal is “95% done” which had the market certain that a deal could be done in November. As the week ended, we then saw Jo Johnson’s resignation have an effect on the market- especially after his comments calling for another referendum and claiming that the current Brexit plan is not what was promised previously.
Unfortunately, it seems that we are still in no mans land as far as Brexit deal is concerned, the PM is apparently working on a “secret plan” which she will be taking to her cabinet, if this manages to get through then the UK Government seem confident that this deal will be accepted by the EU and allow for plans to move forward- however until we have any confirmation on this, it is hard to judge what will actually happen.
This week, consequently, could be pretty tough for Sterling unless we see something positive from the UK Government, comments have been made over the weekend about the cabinet wanting to vote down the PM’s new plan- especially with Irish backstop suggestions- so it will be interesting to see how things play out as the week goes on.
There are also some noteworthy data releases this week which could impact Sterling exchange rates- the first being UK unemployment and average weekly earnings on Tuesday- the reason this is so important is that inflation is on the up in the UK- and if average earnings don’t rise with it, then the UK will find itself in a place where consumers cannot afford their mortgages and this could pose to become a problem.
The next important data release is on Wednesday, where UK inflation will be released, investors will be looking for these numbers to be in line with wage growth in the UK, is things are strong for the UK then we could see the Pound move positively, however, Brexit will still take the spotlight this week.
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